Even though several parts of the world are still witnessing a resurgence of COVID-19 cases, most travel companies have been witnessing solid leisure and business travel demand with the reopening of the economy. Moreover, as more people get vaccinated, travel companies should see increasing demand for their services. According to a Technavio report, the travel market is expected to grow at a CAGR of 13.9% by 2026. Therefore, both Expedia Group, Inc. (EXPE) and Booking Holdings Inc. (BKNG) should benefit.
EXPE operates internationally as an online travel company. The company operates through Retail, B2B, and trivago segments. Its brand portfolio includes Brand Expedia, Hotels.com, Vrbo, and CarRentals.com. BKNG provides online reservations for travel, restaurant, and related services worldwide. The company operates through Priceline; Booking.com; Rentalcars.com; Agoda; KAYAK; and OpenTable.
EXPE has gained 5.3% over the past month, while BKNG has returned 2.5%. But which of these two stocks is a better buy now? Let’s find out.
Latest Developments
On February 10, 2022, Peter Kern, EXPE’s Vice Chairman and CEO, said, “We are increasing our speed of innovation for travelers, our breadth of tools to help power the travel ecosystem, and our effectiveness and efficiency as a company. This is a big year of delivery for Expedia Group, and we look forward to helping drive a robust revival of our industry and great traveler experiences.”
On December 30, 2021, BKNG announced that it had acquired Getaroom from Court Square Capital Partners for approximately $1.20 billion. Getaroom is a B2B distributor of hotel rooms and will roll into BKNG's Priceline brand to form a new Strategic Partnerships business unit with the Priceline Partner Network. Brett Keller, CEO of Priceline, said, "By combining the technology and expertise of Getaroom and Priceline, we believe we can increase value for both hotel and affiliate partners."
Recent Financial Results
EXPE’s revenue increased 148% year-over-year to $2.28 billion for the fiscal fourth quarter ended December 31, 2021. The company’s adjusted EBITDA came in at 1.48 billion compared to a loss of $368 million in the previous year's quarter. In comparison, its adjusted net income came in at $257 million compared to a loss of $1.24 billion in the prior-year quarter. Also, its adjusted EPS came in at $1.65 compared to a loss of $8.78 in the year-ago period.
BKNG’s total revenues increased 77.1% year-over-year to $4.68 billion for the fiscal third quarter ended September 30, 2021. The company’s operating income grew 539.7% year-over-year to $2.02 billion. However, its net income came in at $769 million, representing a 4% year-over-year decrease. Also, its EPS came in at $18.60, down 4.6% year-over-year.
Expected Financial Performance
Analysts expect EXPE’s revenue to increase 81.1% for the quarter ending March 31, 2022, and 35.5% in fiscal 2022. The company’s EPS is expected to grow 78.2% for the quarter ending March 31, 2022, and 345.5% in fiscal 2022. Moreover, its EPS is expected to grow at a rate of 22.8% per annum over the next five years.
BKNG’s revenue is expected to increase 131% for the quarter ending March 31, 2022, and 43.9% in fiscal 2022. Its EPS is expected to grow 233.5% for the quarter ending March 31, 2022, and 131.8% in fiscal 2022. Also, the company’s EPS is expected to grow at a rate of 211.4% per annum over the next five years.
Profitability
BKNG’s trailing-12-month revenue is 1.07 times what EXPE generates. BKNG is also more profitable with an EBIT margin and net income margin of 19.92% and 4.15% compared to EXPE’s 3.05% and 0.14%, respectively
Furthermore, BKNG’s ROE, ROA, and ROTC of 7.31%, 5.05%, and 6.66% are higher than EXPE’s 0.40%, 0.81%, and 1.30%, respectively.
Valuation
In terms of forward EV/S, BKNG is currently trading at 9.25x, 203.3% higher than EXPE’s 3.05x. Moreover, BKNG’s forward non-GAAP PEG ratio of 5.44x is 122% higher than EXPE’s 2.45x.
So, EXPE is relatively affordable here.
POWR Ratings
EXPE has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, BKNG has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
EXPE has an A grade for Growth, consistent with analysts’ expectations that its EPS and revenue will increase in the upcoming months. On the other hand, BKNG has a B grade for Growth.
Also, EXPE has a C grade for Value, consistent with its trailing-12-month P/CF of 7.98x, 31.3% lower than the industry average of 11.63x. However, BKNG has a D grade for Value, in sync with its trailing-12-month P/CF of 52.90x, 355% higher than the industry average of 11.63x.
Of the 77 stocks in the Internet industry, EXPE is ranked #5. In comparison, BKNG is ranked #18.
Beyond what I’ve stated above, we have also rated the stocks for Value, Momentum, Stability, and Sentiment. Click here to view all the EXPE ratings. Also, get all the BKNG ratings here.
The Winner
Thanks to the extensive vaccination drive, the travel industry is rebounding with the reopening of the economy. While both EXPE and BKNG are expected to grow in the long run, it is better to bet on EXPE now because of its lower valuation.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Internet industry here.
EXPE shares were trading at $198.60 per share on Monday afternoon, up $6.48 (+3.37%). Year-to-date, EXPE has gained 9.89%, versus a -7.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
Expedia Group vs. Booking Holdings: Which Travel Stock is a Better Buy? StockNews.com
