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Time to Buy These 2 Travel Stocks?

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With travel demand expected to be higher in 2023, two stocks out of the Zacks Internet-Commerce industry are starting to stick out for their exposure to the broader travel industry.

With the Internet-Commerce industry currently in the top 25% of over 250 Zacks Industries, Expedia Group (EXPE - Free Report) and TripAdvisor (TRIP - Free Report) look poised to be the beneficiaries of a stronger business environment.

Top Line Growth

Expedia and TripAdvisor are two of the largest online travel companies in the world. Expedia’s web portals focus on travel planning, travel purchases, and travel experience sharing.

TripAdvisor’s platform is also for users to share reviews and opinions on hotels, destinations, attractions, and restaurants. In addition to this, TripAdvisor also facilitates bookings between hotel operators and consumers.

TripAdvisor’s top-line growth is starting to stick out. TripAdvisor’s current fiscal 2022 sales are now expected to pop 64% and climb another 17% in FY23 to $1.73 billion. More importantly, fiscal 2023 would represent 10% growth from pre-pandemic levels with 2019 sales at $1.56 billion.

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Looking at Expedia, sales are forecasted to jump 37% for its current fiscal 2022 and rise another 9% in FY23 at $12.87 billion. With 2019 sales at $12 billion, fiscal 2023 would be a 7% increase from pre-pandemic levels.

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Earnings Estimates

On the bottom line, Expedia’s earnings are very intriguing and expected to now rebound 352% for FY22 at $7.46 a share compared to EPS of $1.65 per share in 2021. Even better, fiscal 2023 earnings are projected to climb another 20%. Plus, earnings estimate revisions have noticeably increased  for FY22 and FY23.

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Pivoting to TripAdvisor, earnings are now expected to be $0.61 a share for FY22 compared to an adjusted loss of -$0.30 per share in 2021. Fiscal 2023 earnings are forecasted to rebound another 120% at $1.34 per share. Earnings estimates have gone down for FY22 and have slightly declined for FY23 as well.

Performance & Recent Momentum

Over the last year, TripAdvisor is down -26% Vs. Expedia’s -42% with both underperforming the S&P 500’s -16%. Looking at the last decade, Expedia’s +70% has largely outperformed TripAdvisor’s -51% but still trailed the benchmark.

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Although Expedia and TripAdvisor’s historical performances have lagged the broader market, analysts have remained very optimistic about online travel companies due to pent-up demand and a resilient consumer.

This has recently led to continued rallies in Expedia and TripAdvisor stock with both up roughly +24% in the last month to impressively top the rally in broader indexes to start the new year. 

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After the recent spike in Expedia and TripAdvisor stock, they still trade reasonably relative to their past which could support more upside ahead. Shares of Expedia especially stand out trading at $106 per share and 15.3X forward earnings. In comparison, TripAdvisor trades around $21 per share and 32.6X forward earnings.

Expedia trades nicely below the industry average of 24.4X and beneath the S&P 500’s 17.9X. This is also 76% below its decade high of 63.5X and a 40% discount to the median of 25.5X. In its own right, TripAdvisor stock trades much more reasonably to its extreme decade-long high of 3,600X and at a 33% discount to the median of 48.9X.

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Bottom Line

Expedia stock appears to have the edge over its online travel peer and currently sports a Zacks Rank #1 (Strong Buy) in correlation with rising earnings estimate revisions, along with its standout valuation among the industry.

However, TripAdvisor’s top-line growth is very impressive and the company appears to be a sound investment as well with earnings stabilizing despite estimates trending down over the last quarter. This lands TripAdvisor a Zack Rank #3 (Hold) at the moment.

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