With most people staying put for almost two years due to pandemic-related lockdowns, summer vacation planning seems to be back on the menu. Airline stocks hinted at the revival of travel when they posted their earnings in April, mostly predicting a return to profitability in 2022.
Online travel service providers and hotel chains also provided better than expected earnings as demand seems to be returning to pre-pandemic levels. Yet, The Dow Jones U.S. Travel & Tourism index is down 20.7% year-to-date (YTD), along with it the S&P 500 Hotel Resorts & Cruise Lines index is down 7.1% YTD.
Despite this discrepancy between the return of demand and the performance of travel indices, Finbold has identified two stocks that might benefit from a resurgence in travel demand.
Expedia Group (NASDAQ: EXPE)
EXPE posted earnings on May 2, with revenues coming in at $2.25 billion, which is an increase of 80% year-on-year (YoY). For the first quarter of 2022 total gross bookings were $24.4 billion up 58% compared to the first quarter of 2021; however, down 17% compared to the first quarter of 2019.
Earnings per share (EPS) of -$0.47 beat estimates by $0.01 with adjusted earnings at $173 million to match the earnings seen in Q1 of 2019. Market participants seem skeptical since the shares lost roughly 25% in just one month.
In the last trading session, the shares nosedived another 5% pushing the price far below all daily Simple Moving Averages (SMAs) close to January 2021 lows. If the price breaks down below $130, more downside could be expected as there is an increase in sale volume coming in, in the last few trading sessions.
Elsewhere, analysts rate the stock as a moderate buy predicting that in the next 12 months the average share price will be $215.17. This estimate is 62.60% higher than the current trading price of $132.23.
Airbnb Inc. (NASDAQ: ABNB)
On May 3, ABNB posted earnings that beat expectations on both the top and bottom lines, with revenue rising 70% to $1.51 billion, beating estimates by $60 million. EPS was at -$0.03 beating expectations by $0.27.
Nights and experiences booked increased by 59% or 102.1 million in Q1, which surpasses the pre-pandemic levels. The value of these bookings equates to $17.2 billion a rise of 67% YoY, with the company predicting that 2022 revenue will be between $2.03 to $2.13 billion.
Shares however lost over 5% in the last trading sessions, and YTD shares are down over 20%. Currently, the price is below the December 2021 initial public offering (IPO) price, well below all daily SMAs. If the price breaks down under $129.71, it’s all-time low more downside could be possible.
On Wall Street, the consensus is a moderate buy with the next 12 months’ average price prediction of $191.57. This price is 41.03% higher than the current share price of $135.84, with more bullish analysts seeing a possible 84% upside to $250.
Market participants seem skeptical of the traveling revival as the shares of online travel service providers have been punished in 2022. Companies are reporting solid earnings, beating expectations, and the summer travel bug should be nibbling at people as pandemic lockdowns prevented most people from traveling.
It seems as if other macroeconomic trends are worrying investors, the market is generally down as of late. If people continue to travel, both of these companies should see a continued increase in bookings and revenue which will be positive for shareholders in the end.
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