Online Travel Companies: Good Places to Book Some Profits

Online travel booking companies have been taking off lately especially in the wake of Travelzoo (TZOO) and Expedia (EXPE) both posting solid revenues last week. Wall Street analysts yesterday decided to hop aboard the online travel express by upgrading both Orbitz WorldWide (OWW) and Priceline.com (PCLN) probably so they don’t look like idiots when those companies beat their upcoming earnings estimates.

These companies have been moving up solidly in the past several months and according to some analysts, they still have a ways to go. Any of these would make nice additions to a diversified portfolio.

Here’s a brief look at the four top players in the space.

Travelzoo (TZOO)
Barely a year after the company’s IPO in 2003, the stock traded at an all-time high of $110. But by the middle of this past January, the stock had sunk to under $4. It beat earnings in early February and again in April and the stock hasn’t looked back. Although it missed estimates by a penny last week, revenues increased by 12% fueled by an increase in subscribers and strong business overseas.

The stock is butting up against $14 resistance and if it breaks through that, then I’d be all over it (click to enlarge).

Expedia (EXPE)
Last Thursday, Expedia posted a drop in second quarter profit but its adjusted earnings beat estimates by seven cents with the number of transactions increasing by 18% year over year. It’s chart (click to enlarge) formed a double bottom in November and March and since then the price has tripled, closing yesterday over $18. The stock faces major resistance at $25, but until then, there are no technical obstacles.

Orbitz WorldWide (OWW)
Based on yesterday’s upgrade, Orbitz took off gaining over 20% on the day as one analyst boosted his price target to $4. At $3.13, it still has a lot of upside. Note that it reports earnings before the bell on Wednesday. Normally, I would say buy this today on the open and sell it before the close, but holding this stock over its earnings may not be too risky considering yesterday’s action. Conservative investors, however, should wait until after they report.

Priceline.com (PCLN)
Priceline debuted in 1999 right at the peak of the dot.com bubble. It reached a lofty $990 a share before being flushed down the toilet. It, too, put in a double bottom at $7 in 2000 and 2003. After that, it rose to $134 before the recent melt-down hit. But the stock quickly rebounded and is currently testing its previous $134 level. The company has either beat or equaled estimates for every quarter since 2003. That’s quite impressive but we’ll see next week if it can keep up with good work. Earnings are scheduled for August 10th before the bell. I’d wait until the stock breaks $134 before buying and I’d probably sell it before earnings.

Why the increase in online travel?
A good question to ask is why the increase in online travel? Company suits still need to conduct business in person, Uncle Harry wants to attend his niece’s wedding, and folks still want to spend their vacations someplace else which is why individuals along with corporations are implementing cost cutting strategies to their travel budgets. This is where online travel services have the advantage over traditional travel agents by offering the prospective traveller an array of choices at lower prices, and in a recession, every nickel counts.

So, until the economy eases and people are feeling more financially secure, expect online travel companies to do well. Adding one of these to your portfolio could well be your ticket to increased profits.

Comments

[je:]

These all look to be following the markets (which I expect top top at 10,400 to11,200) except OWW (looks to top at $4-5)

Tzoo looks to be a good Dec option play if it would pull back to the neck line at about 12.50 with a price target right at $20 from the inverse head and shoulders.

That isn't the best option play that I have found though - That is YGE which is currently at $13.86 with a target of $32.

Aug 04 08:34 AM

[Paul-n-Texas:]

I'm surprised to see the public so eager to book vacations now with the economy so tight.
I'm also surprised that someone would trust their vacation plans to some online agency when a good local travel agent can usually meet their deals while providing personal service from an experienced traveller.
If you ever have a problem with Priceline or one of the other big online agencies, good luck getting a real person that can help you in a knowledgable fashion.

Sep 15 12:50 PM

[home-swap:]

even if the economy is tight vacation home exchange is best option to save thousands of dollar and enjoy the vacations


On Sep 15 12:50 PM Paul-n-Texas wrote:

> I'm surprised to see the public so eager to book vacations now with
> the economy so tight.
> I'm also surprised that someone would trust their vacation plans
> to some online agency when a good local travel agent can usually
> meet their deals while providing personal service from an experienced
> traveller.
> If you ever have a problem with Priceline or one of the other big
> online agencies, good luck getting a real person that can help you
> in a knowledgable fashion.

Nov 03 06:58 AM