Expedia Group, Inc. (EXPE) and Tripadvisor, Inc. (TRIP) are two prominent players in the travel services industry. EXPE is an international online travel company that operates through Retail; B2B; and trivago segments. It offers travel shopping and reservation services, advertising, and media services and provides real-time access to schedule, pricing, and availability information for airlines, hotels, and car rental companies. In comparison, TRIP is an online travel company that operates through Hotels, Media & Platform; and Experiences & Dining segments. It provides information and services for consumers to research and book restaurant reservations in travel destinations and vacation and short-term rental properties.
The travel and tourism industry has witnessed ups and downs since the onset of the pandemic. However, with the lessening concerns over the COVID-19 variants, the growing demand for travel bookings, travel metasearch engines, reviews, and fare comparisons should allow online travel service providers to witness rising demand.
Investors’ interest in this space is evident from the ALPS Global Travel Beneficiaries ETF’s (JRNY) 1.2% gains versus the SPDR S&P 500 Trust ETF’s (SPY) negative returns over the past three months. The global online travel market is expected to grow at a 10.6% CAGR to reach $1.46 trillion by 2027. Therefore, both EXPE and TRIP should benefit.
While TRIP has lost 5.5% over the past three months, EXPE has surged 20.7%. EXPE is a clear winner with 28.5% gains versus TRIP’s 31.5% returns over the past six months. But which of these stocks is a better pick now? Let’s find out.
Latest Developments
On February 28, 2022, British multinational hospitality company InterContinental Hotels Group plc’s (IHG) IHG Hotels & Resorts have selected EXPE as the preferred redistributor of their properties’ wholesale rates through EXPE’s Optimized Distribution Preferred program. EXPE’s program resolves these expensive wholesale distribution challenges and maintains disparate channels by creating a primary gateway solution for the hotelier and its B2B demand partners. This ultimately reduces costs, generates incremental revenue for hotels, and provides accurate content and better rates to tour operators and travelers.
On February 3, 2022, TRIP’s Cruise Critic subsidiary, the world's leading cruise reviews site, announced a partnership with Kayak, an online travel agency and metasearch engine, to jumpstart TRIP’s return to offering cruises in its search results. This will allow Kayak users to access Cruise Critic's vast network of cruise itineraries and reviews. TRIP should witness high demand in the coming months.
Recent Financial Results
EXPE’s revenue for its fiscal 2021 fourth quarter ended December 31, 2021, increased 147.7% year-over-year to $2.28 billion. The company’s operating income came in at $163 million for the quarter, compared to a $463 million loss in the prior-year period. EXPE’s adjusted net income came in at $167 million, compared to a net loss of $376 million in the year-ago period. Its adjusted EPS came in at $1.06, versus a $2.64 loss per share in the prior-year period. As of December 31, 2021, the company had $4.11 billion in cash and cash equivalents.
For its fiscal 2021 fourth quarter ended December 31, 2021, TRIP’s revenue increased 107.8% year-over-year to $241 million. The company’s operating loss came in at $28 million, representing a 69.6% decline from the prior-year period. TRIP’s non-GAAP net loss came in at $1 million, indicating a 98.2% year-over-year decline. Its non-GAAP loss per share decreased 97.6% year-over-year at $0.01. The company had $723 million in cash and cash equivalents as of December 31, 2021.
Past and Expected Financial Performance
EXPE’s total assets and levered free cash flow have increased at CAGRs of 6.1% and 38.9%, respectively, over the past three years.
EXPE’s EPS is expected to grow 365.5% year-over-year in fiscal 2022, ending December 31, 2022, and 39.1% in fiscal 2023. Its revenue is expected to grow 37.6% year-over-year in fiscal 2022 and 16% in fiscal 2023. Analysts expect the company’s EPS to grow at a 22.8% rate per annum over the next five years.
In comparison, TRIP’s total assets have increased at a CAGR of 1.8% over the past three years. The company’s levered free cash flow has declined at a CAGR of 29.9% over the past three years.
Analysts expect TRIP’s EPS to rise 396.7% year-over-year in fiscal 2022, ending December 31, 2022, and 92.1% in fiscal 2023. Its revenue is expected to increase 49.1% year-over-year in fiscal 2022 and 20.1% in fiscal 2023. The company’s EPS is expected to grow at a rate of 110% per annum over the next five years.
Valuation
In terms of non-GAAP P/E, TRIP is currently trading at 25.80x, 5% higher than EXPE’s 24.58x. In terms of trailing-12-month Price/Sales, EXPE’s 3.27x compares with TRIP’s 3.60x.
Profitability
EXPE’s trailing-12-month revenue is almost 9.5 times TRIP’s. However, EXPE is more profitable, with a 5.7% EBITDA margin versus TRIP’s negative value.
Furthermore, EXPE’s ROE, ROA, and ROTC are 0.4%, 0.8%, and 1.3% compare with TRIP’s respective negative values.
POWR Ratings
While EXPE has an overall B grade, which translates to Buy in our proprietary POWR Ratings system, TRIP has an overall C grade, equating to a Neutral. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.
Both EXPE and TRIP have a B grade for Quality, consistent with their higher-than-industry profitability ratios. EXPE’s 82.3% trailing-12-month gross profit margin is 129.9% higher than the 35.8% industry average. TRIP has a 91.8% trailing-12-month gross profit margin, 78.1% higher than the industry average of 51.6%.
Both EXPE and TRIP have a B grade for Growth. EXPE’s trailing-12-month revenue has grown 65.4% over the past year, while TRIP has increased 49.3% during the period.
Of the 75 stocks in the Internet industry, EXPE is ranked #4, while TRIP is ranked #15.
Beyond what we have stated above, our POWR Ratings system has also rated EXPE and TRIP for Stability, Sentiment, Value, and Momentum. Get all EXPE ratings here. Also, click here to see the additional POWR Ratings for TRIP.
The Winner
The growing travel demand should allow both EXPE and TRIP to thrive. However, relatively lower valuation and higher profitability make EXPE a better buy here.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Internet industry.
EXPE shares were trading at $192.75 per share on Wednesday afternoon, up $4.90 (+2.61%). Year-to-date, EXPE has gained 6.66%, versus a -7.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
Expedia Group vs. Trip.com: Which Travel Stock is a Better Buy? StockNews.com
