Which travel stock is a better buy?
The past 20 months have been extremely volatile for investors exposed to the travel and hospitality sectors. The COVID-19 pandemic has resulted in global lockdowns and border closures, abruptly halting international and domestic travel.
The accelerated pace of vaccine deployments, especially in developed countries, renewed investor optimism in early 2021, but the emergence of new variants of the coronavirus continues to weigh heavily on travel service companies.
However, now may be the time for contrarian investors to grab stocks of some of those bearish stocks.
Therefore, today I will analyze and compare Trip.com (TCOM) and Reserve assets (BKNG) to determine which stock is a better investment if you are looking to buy the downside.
Valued at a market cap of $ 15.5 billion, Trip.com is a China-based travel service provider for booking accommodation, transportation ticketing, organized and destination trips, and other travel-related services. The company acts as an agent for hotel and transport related transactions.
The company’s sales fell nearly 50% year-over-year in 2020 due to the ongoing pandemic. In the third quarter of 2021, revenue was down 9% sequentially to $ 831 million. The erosion of turnover is due to the increase in the number of COVID-19 infections in several provinces of China.
Trip.com pointed out that stay is a major driver of the recovery in domestic travel in China, as intra-provincial hotel bookings increased 35% while local hotel bookings soared 60% in the third quarter compared to the same period in 2019.
In comparison, international flight bookings increased 40% sequentially, driven by recovering markets in the United States and Europe. In addition, revenue associated with the management of business travel increased 20% year-over-year and 1% from the third quarter of 2019.
One of the world’s largest travel platforms, Booking Holdings is valued at a market capitalization of nearly $ 100 billion. The company’s sales grew from $ 14.5 billion in 2018 to $ 15 billion in 2019, and then fell to $ 6.8 billion in 2020. In the past 12 months, Booking.com sales reached $ 9.2 billion and are provided at 59.5% to $ 10.84 billion in 2021 and 44.6% to $ 15.67 billion in 2022.
We can see that it will take another year for Booking.com revenue to reach pre-COVID-19 levels. Nights in room The third trimester collapses from 26% compared to the same period in 2019. This is a significant improvement compared to the decrease of 54% in the last quarter.
Company CEO Glenn Fogel said in early August 2021 that Booking.com’s gross bookings for the rest of the summer were higher than in 2019.
UBS also pointed out that Booking Holdings is a leading brand in the travel industry and expects Adjusted EBITDA margin to increase by 4 percentage points in 2023 as the company is expected to sell directly to customers.
Its direct bookings, which represent the majority of bookings, could reach 54% by the end of 2023, allowing it to improve its EBITDA margins to 38%. By comparison, Booking’s EBITDA margin was 39% before COVID-19.
Both companies are expected to grow revenues at an impressive rate in the near term, especially if the pandemic is brought under control. Still, I think Booking.com’s stellar improvement in bottom line, better brand value, and a diverse revenue base make it a better bet than Trip.com right now.
TRIP stock was trading at $ 28.21 per share on Monday morning, up $ 0.95 (+ 3.48%). Year-to-date, TRIP is down -1.98%, compared to a 28.81% increase in the benchmark S&P 500 over the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes on business, public equity and personal finance. His work has been published on multiple digital platforms in the United States and Canada, including The Motley Fool, Finscreener, and Market Realist. Following…