Is This Stock Tripping?
Marshall is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
TripAdvisor (NASDAQ: TRIP) spiked 20% last week; the company beat EPS consensus estimates and net income was up 26% year-over-year. Its 2Q EPS of $0.46 was inline with consensus. Part of the big earnings bump was the fact that the company began its first TV ad campaign last quarter. It also snatched up five companies.
However, TripAdvisor's business model is a bit different than the likes of the major online-booking sites, even though it is generally grouped with them. TripAdvisor's site is focused on travel research, aggregating reviews and opinions from users. As a result, the company gets around 90% of its revenue from advertising.
What's more is that interest for TripAdvisor is at all-time highs, according to Google Trends.
All the travel sties should see an interim boost thanks to the rebounding economy and rising employment. As people have more money, there should be a greater willingness to spend on traveling.
Unlike TripAdvisor, Expedia (NASDAQ: EXPE) took a large tumble last week. The company tanked over 25% on the news that 2Q EPS came in at $0.64 compared to $0.89 from the same period last year. This was well below consensus of $0.79.
Expedia operates the Hotels.com website and Hotwire, and the company spun-off TripAdvisor back in December 2011. Expedia remains TripAdvisor's largest customer, accounting for over 25% of revenue in 2012.
Expedia is expected to see revenue up 19% in 2013, and despite losing TripAdvisor, the company has been making investments in other areas, including its technology platform. This will, in part, help the company facilitate its diffusion into the Chinese market. Expedia also acquired a Vietnamese e-commerce company called PeaceSoft.
Priceline.com (NASDAQ: PCLN) is the travel industry's leader by revenue, having generated some $5.5 billion over the past 12 months compared to Expedia's $4.2 billion.
Back in May, Priceline snatched up Kayak Software, further securing its position as the top online-travel servicer. Priceline has had great success in Europe. Over 90% of 2012 operating income was derived from international operations. The company is now turning to Asia to fuel growth.
I think that Priceline also has room to grow. Despite being the industry leader, the company, according to alexa.com, has global traffic rank of 670th, while TripAdvisor is ranked 223rd and Expedia 482nd.
But the real beauty about Priceline is that even without being able to penetrate the U.S. market, the rebound in the European market holds solid growth prospects. Global online travel sales are expected to move from $141 billion in 2012 to $176 billion by 2016. Over this same time period, the company's ratio of online sales to total travel sales in Europe is is expected to move from 45% in 2012 to 50% by 2016.
Its European exposure provides a solid growth opportunity given the region's rebound from the debt crisis and rise in the travel industry. Its booking.com site only holds about 6% of the European hotel market, leaving tons of room for growth.
All in all, both Expedia and TripAdvisor still trade well in excess of Priceline...
But that's not the only reason Priceline is the best bet. Priceline also has the best balance sheet, with the lowest debt-to-equity ratio.
When you couple it's growth, Priceline trades at a PEG ratio 1.3, compared to TripAdvisor's 2.3 and Expedia's 1.4. Priceline is the industry leader and should be one of the big benefactor's of a rebounding economy and increased travel.
The Motley Fool's chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.
Marshall Hargrave 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!