How Does This Internet Travel Company Measure Up?
Dan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Would you like to enjoy a luxurious vacation on the beach? Find an affordable seven-night cruise in Alaska? Plan an itinerary for your European adventure? If so, then Expedia (NASDAQ: EXPE) might be your best option. However, this doesn’t mean Expedia is the best investment option compared to its peers.
As many investors already know, Priceline (NASDAQ: PCLN) has been the biggest winner for Internet travel companies over the years. But does that mean it’s the best investment going forward? And what about TripAdvisor (NASDAQ: TRIP)? TripAdvisor has outperformed Expedia and Priceline recently.
Which site has the best traffic?
According to Alexa.com, TripAdvisor has the most traffic.
The numbers above should indicate that TripAdvisor has the most potential, but numbers can deceiving. TripAdvisor is the most popular site because travelers leave reviews about their experiences, and because potential travelers read those reviews for information prior to booking a vacation.
However, a site that's best known for travel reviews isn't going to have the most revenue potential. Plus, TripAdvisor isn't the best at keeping its visitors on the page -- a key factor for revenue potential.
As you can see in the chart above, Pricline dominates in every category. Visitors view more pages, stay on-site longer, and they rarely visit one page and leave. The bounce rate indicates only one pageview per visit. Therefore, you always want to look for a low bounce rate when looking at website analytics.
Other important numbers
Expedia has a short position of 8.80%. The short interest is high for several reasons:
- The stock is currently trading at a lofty 45 times earnings.
- The first quarter disappointed
- Guidance is weak.
- The consumer isn’t gaining strength, which puts a lot of pressure of the travel industry.
Priceline and TripAdvisor are also dealing with an unsure economic environment. However, only TripAdvisor has a similar valuation to Expedia, currently trading at 44 times earnings. Priceline isn’t cheap at 28 times earnings, but it offers the most consistent growth. Priceline's revenue and earnings have consistently improved on an annual basis, and massive profits have become commonplace.
Company culture and leadership should also come into play when making an investment decision. According to Glassdoor.com, Expedia employees have rated their employer a 3.3 of 5, and 65% of employees would recommend the company to a friend. Leadership is above average as 74% of employees approve of CEO Dara Khosrowshahi.
While those numbers are decent, Priceline employees have rated their employer a 4.1 of 5, 85% of employees would recommend the company to a friend, and 92% of employees approve of CEO Jeff Boyd.
TripAdvisor’s company culture and leadership are stronger than Expedia’s, but not nearly as strong as Priceline’s. TripAdvisor employees have rated their employer a 3.7 of 5, 70% of employees would recommend the company to a friend, and 85% of employees approve of CEO Stephen Kaufer.
Priceline wins in website traffic, growth consistency, valuation, company culture, and leadership. That said, none of these companies are likely to hold up well if the stock market suffers a steep correction.
While Main Street consumers have been suffering for years, investments have paid off handsomely for higher-end earners with risk tolerance. This has led to a massive amount of discretionary income for these higher-end earners. If this wealth disappears as a result of reduced monetary stimulus and/or rising interest rates, then those trips to the Bahamas and Hawaii will come to a quick halt.
However, for those who believe in the economic turnaround and want exposure to the space, Priceline looks to be the best and safest option.
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Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Priceline.com and TripAdvisor. The Motley Fool owns shares of Priceline.com and TripAdvisor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!