Expedia and Airbnb shares rise after analysts say online travel demand still strong
Shares of Expedia Group Inc. and Airbnb Inc. traded higher on Wednesday after analysts wrote that online travel booking ‘trends remain robust thanks to pent-up demand and a resilient consumer “.
Oppenheimer analysts updated the Expedia EXPE stock on Wednesday,
whose brands include Hotels.com, Orbitz and Vrbo, to outperform relative to performance and set a price target of $120 on expectations that the company is well positioned to outperform its pre-pandemic performance. Expedia shares rose about 5% to $99.20 in intraday trading.
What Oppenheimer analysts like: Expedia’s cost reduction and “customer service efficiency improvements,” which “led to E22 EBITDA [earnings before interest, taxes, depreciation and amortization] margins improved by around 320 basis points from 2019 to 20.9%. They’re also bullish on “One Key,” which consolidates Expedia’s brands into a single loyalty program and which they say could lead to lower participation rates but improved margins “thanks to reduced risk.” Google,” or relying less on customer acquisition from search results.
The downside risks they see for the stock include possibly slower growth for Vrbo as travel returns to normal patterns after pandemic-related gains for alternative accommodations, future COVID-19 restrictions and of course worries about the economy.
Airbnb ABNB Shares,
the biggest name in alternative hosting, also rose sharply, almost 6% in intraday trading. This is despite analysts writing that third-party data indicates the company is having supply issues and is being affected by the return of travel to pre-pandemic patterns.
Airbnb “is in a difficult position in the near term as supply is likely limited in urban markets where it has lost share to hotels in the COVID recovery,” they said.
Analysts also looked at what Airbnb is doing to try to boost urban supply, namely its drive to become more apartment-friendly. They noted that the company is working with a dozen property owners and managers to add more than 175 buildings in 29 U.S. city markets, which should help increase the number of room nights booked and gross booking value.
Other risks to Airbnb shares include increasing short-term rental restrictions in some markets, such as New York and Washington, DC, analysts said. They cut their estimates for 2023 nights and revenue by 3%, and EBITDA by 5%, although they maintained a Perform rating.
Oppenheimer analysts said Booking Holdings Inc. BKNG,
is their top pick in the sector and raised its price target for the stock to $2,550 from $2,280. The travel booking company’s brands include Priceline, Kayak and Booking.com.
“We view BKNG as the cleanest story in online travel (lower revenue risk, reasonable valuation, buybacks) in a volatile market environment,” the analysts wrote.
Booking shares edged up about 0.2% on Wednesday to $2,225.95.
Meanwhile, Tripadvisor Inc. TRIP,
shares were down 0.1% at $20.55. Oppenheimer analysts wrote that they were on hold until “we can better understand how new management plans to diversify revenue from core segments and mitigate some of Google’s risk.”