It's clear that travel is back in full swing. Whether it's hitting the road or catching flights, Americans are making the most of slightly cheaper travel costs this summer. Despite inflation-driven price hikes, the 2024 travel season kicked off with record numbers over Memorial Day, both in the air and on the roads.
As vacation plans remain strong, investors could consider investing in these three fundamentally strong travel stocks: Booking Holdings Inc. (BKNG), Expedia Group, Inc. (EXPE), and Airbnb, Inc. (ABNB), which are poised to benefit from this trend.
AAA reported a record 38.4 million drivers hit the road at the start of summer, while the Transportation Security Administration (TSA) saw an all-time high of 2.9 million passengers passing through U.S. airports on May 24. This trend continued into June, with some days approaching 3 million travelers.
Moreover, those planning late summer getaways will likely benefit from lower gasoline and airfare prices, which offers some relief from inflation and makes spontaneous trips more affordable. The global travel and tourism market is on track for substantial growth, with revenue expected to hit $916 billion by 2024 and reach $1.11 trillion by 2029.
A stable global economy and pent-up travel demand have also reassured business leaders to resume corporate travel. The latest GBTA Business Travel Index Report projects global business travel spending to surpass $2 trillion by 2028.
Considering these factors, BKNG, ABNB, and EXPE are well-positioned to capitalize on the industry's tailwinds. To that end, let us examine the fundamentals of these stocks in detail:
Booking Holdings Inc. (BKNG)
BKNG provides online reservations for travel, restaurants, and related services worldwide. The company offers online accommodation, travel reservations, rental car reservation services, and vacation packages through five primary consumer-facing brands: Booking.com, Priceline, Agoda, KAYAK, and OpenTable. It has a market cap of $127.40 billion.
In February, Priceline launched its Winter 2024 Product Release, introducing advanced AI-powered features, including significant enhancements to Penny, its AI travel assistant. This update to the Trip Intelligence suite adds over 30 new features, positioning Priceline as a leader in AI tools for the travel industry, aimed at simplifying travel planning and booking.
For the fiscal first quarter, which ended on March 31, 2024, BKNG’s total revenues increased 16.9% year-over-year to $4.42 billion, while its operating income rose 75.8% from the year-ago value to $791 million. The company’s adjusted net income amounted to $708 million and $20.39 per share, up 60.9% and 75.8% from the prior-year quarter, respectively. Also, its adjusted EBITDA grew 53.2% from the prior-year quarter to $898 million.
The consensus revenue estimate of $5.77 billion for the fiscal second quarter (ended June 2024) represents a 5.7% increase year-over-year. The consensus EPS estimate of $38.67 for the about-to-be-reported quarter indicates a 2.8% improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past nine months, the stock has gained 36.7%, closing the last trading session at $3,755.13.
BKNG’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
BKNG has an A grade for Quality and a B for Sentiment. It is ranked #21 in the 52-stock B-rated Internet industry. Click here to see the additional ratings for BKNG (Growth, Value, Momentum, and Stability).
Airbnb, Inc. (ABNB)
With a market cap of $89.06 billion, ABNB is a global platform that connects hosts providing stays and experiences with guests. The company’s marketplace allows private rooms, primary homes, and vacation homes that are available for booking online or via mobile phones.
In the first quarter that ended on March 31, 2024, ABNB’s revenue increased 17.8% year-over-year to $2.14 billion. The company reported an adjusted EBITDA of $424 million, indicating a 61.8% year-over-year rise. Its net income came in at $264 million, or $0.41 per share, up 125.6% and 127.8% from the prior year’s quarter, respectively.
In addition, the company’s net cash flow from operating activities rose 21.2% from the year-ago value to $1.92 billion. As of March 31, 2024, ABNB’s cash and cash equivalents were $7.83 billion, compared to $6.87 billion as of December 31, 2023.
Analysts expect ABNB’s revenue for the second quarter (ended June 2024) to grow 10.2% year-over-year to $2.74 billion. However, the company’s EPS for the same period is expected to decline 7.4% year-over-year to $0.91. Also, the company has topped consensus revenue estimates in all four trailing quarters.
Shares of ABNB have gained 22.9% over the past nine months to close the last trading session at $140.29.
ABNB’s stance is apparent in its POWR Ratings. The stock has an A grade for Quality and a B for Sentiment.
Within the Travel - Hotels/Resorts industry, it is ranked #8 out of 20 stocks. Click here to see ABNB’s ratings for Growth, Value, Momentum, and Stability.
Expedia Group, Inc. (EXPE)
EXPE is a global online company operating through three segments: B2B; B2C; and Trivago. Its extensive portfolio of brands includes Expedia, Hotels.com, Vrbo, Orbitz, CheapTickets, ebookers, Hotwire, and CarRentals.com.
On July 18, EXPE announced a partnership with Ryanair Holdings plc (RYAAY), Europe's leading airline, to offer low-fare flights to its travelers. This collaboration enhances travel options and experiences by integrating Ryanair’s budget-friendly flights into EXPE’s marketplace. Earlier this year, the companies collaborated on 'Ryanair Rooms,' allowing seamless hotel bookings with flights.
EXPE’s revenue for the first quarter ended March 31, 2024, increased 8.4% year-over-year to $2.89 billion, while its gross booking rose by 2.6% from the year-ago value to $30.16 billion. Moreover, the company’s adjusted attributable net income and EPS amounted to $29 million and $0.21, compared to an adjusted net loss and loss per share of $30 million and $0.20 in the same period last year, respectively. Also, its adjusted EBITDA stood at $255 million, up 37.8% year-over-year.
Street expects EXPE’s revenue for the second quarter (ended June 2024) to increase 5.3% year-over-year to $3.53 billion, while its EPS for the same period is expected to grow 9.5% from the prior year to $3.16. Moreover, the company topped the revenue estimates in three of the trailing four quarters, which is impressive.
The stock has gained 37.8% over the past nine months and 6.8% over the past year to close the last trading session at $128.28.
EXPE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Value and Quality. Out of 52 stocks in the Internet industry, it is ranked #11.
Beyond what is stated above, we have also rated EXPE for Growth, Momentum, Stability, and Sentiment. Get all the EXPE ratings here.
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BKNG shares were trading at $3,694.68 per share on Tuesday afternoon, down $60.45 (-1.61%). Year-to-date, BKNG has gained 4.66%, versus a 14.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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