While the Omicron variant of Covid-19 is playing havoc with the travel market at the moment, there’s nonetheless evidence that a travel recovery is underway from the near-shutdown experienced during the worst of the pandemic period. At least one analyst thinks that the right way to play the trend is to buy Expedia stock—and to back away from Airbnb .
Piper Sander analyst Thomas Champion on Monday lifted his rating on Expedia (ticker: EXPE) shares to Overweight from Neutral, while shifting to a Neutral rating from Overweight on Airbnb (ABNB). Champion also sticks to his Neutral rating on Booking Holdings (BKNG).
“While recent news centers on Omicron, we’d recommend online-travel investors focus on the broader canvas,” Champion writes in a research note. “A methodical (if non-linear) travel recovery appears underway.”
Champion contends that travel in 2022 will look a lot like it did in 2019, before the pandemic. He notes that industry data show that traditional lodging-room nights in the 2021 third quarter were down 18% from the 2019 level, up 10% better than the second quarter, and 20% above the first quarter. And he says that air-traffic numbers “also suggests a comeback.” Champion adds that he’s optimistic that the Omicron variant will fade quickly. “We see travelers increasingly desensitized to virus headlines, suggesting entry into an endemic phase versus a pandemic,” he writes.
For Expedia, he sees a favorable situation heading into the new year. Champion sees a “tailwind from continued normalization of travel trends to pre-covid levels,” along with an improved cost structure. And he finds that Expedia has “an undemanding valuation versus peers.” He notes that bookings relative to two years ago have been improving for six quarters and could turn positive in the 2022 first quarter. He lifts his target on Expedia shares to $216 from $197
As for Airbnb, he sees a less favorable set-up for 2022, noting that Street expectations are “elevated,” that valuation is high, and that the focus on alternative accommodations may be a negative as travel normalizes. On Booking, he finds the company to be “outstandingly well run,” but he’s cautious on the stock given more than 80% exposure to international travel. For Airbnb, his new target price is $169, down from $215. For Booking, he cuts his target to $2,470, from $2,750.
In Monday trading, with tech stocks trading sharply lower, shares of both Expedia and Booking are down about 2%, while Airbnb stock has tumbled 7%.
Write to Eric J. Savitz at firstname.lastname@example.org