The tourism sector was among the worst impacted due to the Covid19 pandemic. However, as global travel and tourism now booms, tourism stocks are hot favorites. This view holds true for the short term as well as the long term.
In fact, international tourism ended 2023 at 88% of pre-pandemic levels. Furthermore, international tourism hit $1.4 trillion last year. The estimates are rosy for 2024 even with macroeconomic headwinds.
Additionally, potential rate cuts are expected toward the end of 2024 and in 2025. This will have a positive impact on global growth. Therefore, many expect 2025 to be another good year for travel and tourism.
With positive industry tailwinds, let’s explore three tourism stocks likely to double before the end of 2025.
Expedia Group (EXPE)
Expedia Group (NASDAQ:EXPE) is among the deeply undervalued tourism stocks to buy. Even after a rally of 41% in the last six months, it trades at a forward price-earnings ratio of 11. With the likelihood of strong quarterly numbers, I am bullish on the stock doubling before the end of 2025.
Expedia Group operates as an online travel company with impressive global presence. The company has made a strong comeback after the pandemic, and Q4 2023 was the highest even fourth quarter revenue.
Further, for the full year, revenue increased by 10% to $12.8 billion. For the same period, adjusted EBITDA increased by 14% to $2.7 billion. With operating leverage, it’s likely that EBITDA margin expansion will sustain this year.
Notably, Expedia Group has been aggressively adding new partners to its global travel ecosystem. With positive industry tailwinds, EXPE is likely to accelerate growth in the coming years.
MakeMyTrip (MMYT)
MakeMyTrip (NASDAQ:MMYT) stock has skyrocketed in the last 12 months. However, the rally for this India-based online tourism company has been from deeply oversold levels. Considering the growth potential, I remain bullish on MMYT stock.
Importantly, India is likely to be among the fastest growing economies. This is true not just for 2024, but for the next ten years. With favorable demographics coupled with a swelling middle-class, the tourism sector is poised for a boom.
Further, estimates indicate that Indian travelers are likely to embark on five billion more trips by 2030. And, spending on travel and tourism is expected to hit $410 billion by the end of the decade. Clearly, with a massive opportunity, MMYT stock is a potential multibagger.
Investors note a sustained improvement in operating margin post-pandemic. With healthy growth, this improvement is likely to continue, supporting the stock rally. Additionally, a leading position in the Indian online travel market positions MakeMyTrip for accelerated growth in the coming years.
Tripadvisor (TRIP)
Tripadvisor (NASDAQ:TRIP) is another interesting pick among tourism stocks. The stock trades at an attractive forward price-earnings ratio of 17. With strong financials, the upside momentum for TRIP stock is likely to sustain.
Tripadvisor owns and operates a portfolio of travel media brands and businesses, including Tripadvisor, Viator and TheFork. For 2023, the company reported revenue and EBITDA of $1.8 billion and $334 million, respectively.
In fact, Tripadvisor brand reported EBITDA margin of 34% for the last financial year. Viator contributed to 38% of total revenue but didn’t report any EBITDA profit or loss.
Once the Viator business margin swells, the impact on overall margin and cash flows will be significant. While Tripadvisor revenue growth was 7% year-over-year (YOY), Viator grew at 49%. Therefore, the best part of cash flow upside might be due for the company.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
