Travel is experiencing a resurgence following the Covid 19 crisis, providing a beacon of hope for those who desire to travel and astute investors alike. Many travel stocks, previously bruised and battered, are now recovering early, making them look like undervalued gems. The travel demand isn’t packing its bags anytime soon, and investors are seizing the opportunity to pick up some undervalued stocks to buy for the long haul.
Travel is a sector that ebbs and flows with global events, and arguably no event showcased this as glaringly the Covid-19 crisis. For two grueling years, the U.S. watched as some of the most iconic hotels shuttered their windows while majestic aircraft and the once-bustling cruise ships became silent observers across the globe. With that said, here are three of the top undervalued travel stocks to wager on now.
TripAdvisor (TRIP)
TripAdvisor (NASDAQ:TRIP) has long been synonymous with trip planning and candid reviews in the ever-evolving realm of global travel. Yet, like a ship navigating choppy waters, the firm grapples with narrowing margins and a brawl to maintain its dominance. The past decade witnessed its competitive edge in core markets, thanks to rising challengers and a dwindling pool of high-revenue opportunities. Moreover, with their specialized offerings, nimble online travel agents are seemingly sprinting ahead in the growth race.
However, every cloud has its silver lining, and for TripAdvisor, it’s their latest financial reveal. The company’s second-quarter press release presented a mixed bag; while the non-GAAP earnings-per-share of 34 cents missed the mark by roughly two cents, the revenue figures painted a bright picture. Raking in $494 million, a commendable 18.5% year-over-year bump, it exceeded expectations by $20.5 million.
Moreover, TRIP stock trades at just 1.3 times forward sales, 66% lower than the 5-year median. Additionally, its enterprise-to-sales ratio is at just 1.2, 35.4%, lower than the sector median and 72% lower than the 5-year median.
Expedia (EXPE)
Sitting atop the pyramid of online travel agencies, Expedia (NASDAQ:EXPE) has established its position as a veritable titan. Catering to a wide spectrum of services in the space, Expedia is the digital concierge for countless travelers globally. Moreover, the past year has seen the company pivot with finesse, rolling out strategic cost-saving measures, streamlining operations, and building on its brand equity. Even as the echoes of the pandemic slowly fade, Expedia has penned a travel recovery narrative, cutting down debts and optimizing its workforce.
In their second-quarter financial disclosure, the numbers sparkled. Non-GAAP earnings per share of $2.89 handily surpassed expectations by 53 cents, and a revenue surge to $3.36 billion, a 5.7% year-over-year growth, is just the tip of the iceberg. The narrative is clear, with lodging gross bookings and revenue hitting record highs for any second quarter. And if that wasn’t enough, Tiprank’s recent analysis offers a cherry on top: projecting a potential 20% upside on EXPE stock, crowning it with a ‘Moderate Buy’ rating.
American Airlines (AAL)
Navigating through post-pandemic skies, American Airlines (NASDAQ:AAL) has effectively delivered a performance that’s difficult to overlook. As the travel bug bit harder this year, American Airlines second-quarter earnings soared, touching the clouds with an earnings-per-share of $1.92, significantly higher than the anticipated $1.59 by industry analysts. Regarding revenue, the company’s figures were equally impressive with $14.06 billion against Wall Street’s forecasted $13.74 billion. Adding to the upbeat rhythm, the flying capacity grew by a promising 5.3% in the same quarter.
They’ve optimistically ramped up their forward guidance for 2023, banking on the travel euphoria to sail smoothly into next year. Their sterling second-quarter results mirror the positive winds blowing across the aviation sector. Industry whisperers predict U.S. airlines to be on track to ferry a whopping 257 million passengers in the sunny window between June 1 and August 31. Hence, AAL stock boasts a tremendous bump ahead, with analysts predicting at least a 16% upside from current levels,
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines