3 Stocks Benefiting from the Online Travel Revolution
By Andrs Cardenal - March 23, 2012 | Tickers: EXPE, GOOG, PCLN, TRIP | 0 Comments
Andrs is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.
The world is changing very fast, and information is available in ways we couldnt even imagine a few years ago. The travel industry is being revolutionized by many of the new possibilities that internet and related technologies provide, and investors have many opportunities to benefit from these changes.
Lets assume you are considering taking a well-deserved vacation with your family and are looking for the right destination, you will also need a lot of information about how to travel, the most convenient hotels and other important aspects. There is a big chance you may choose to get into Google (NASDAQ: GOOG) and start searching for online information. Google has more than 65% of the online search market in the US, and the company leads the online advertising industry.
Google gives consumers the possibility to access many valuable services for free and monetizes the business by selling advertising. If you are planning a trip, you will probably use the Google search engine more than once, and other services like Google Earth, Google Maps and Google Images may be very helpful too. In fact, last December the company launched Google Flight Search, which represents the online giants newest push into online travel.
Competitors have complained about Google using its dominant power over online search to place its own flight search service above those of other players like Priceline (NASDAQ: PCLN) and Expedia (NASDAQ: EXPE). However, those two companies are still doing quite well when it comes to searching and booking flights, hotels and car rentals online.
These services are extremely useful for travelers; they provide an easy and convenient way to compare prices, check customers reviews and even execute online reservations in real time. Both corporate and vacation travelers are using these services every day more, and the online traveling trend is expected to get stronger in the future as more customers grow accustomed to its advantages and these businesses increase their range of services and value added.
Shares of Priceline were trading below $450 by mid-December and they recently made new all-time highs above $710. Investors may want to wait or a pullback considering the stock has been on such a strong run lately, but earnings and expectations look very strong. Priceline reported a 35.5% increase in sales for last quarter, although the company disappointed in earnings per share, guidance was much higher than expected and shares of Priceline rose by a 6.5% when it reported earnings on February 27.
Expedia has also had a big run lately; it recently hit new historical highs above $34, which is quite a rally from its price of around $28 in mid-December. The company reported some unexciting earnings per share figures in the last quarter blended with positive guidance from management. But although the recent trend in earnings looks similar for Expedia and Priceline, both companies are quite different from a long term growth perspective.
Priceline has increased earnings per share by a 65% annually over the last five years, and analysts are expecting a growth rate of more than 22.5% annually in the next five. On the other hand, Expedia shows an annual 14% growth rate for the last five years and analysts forecast a lower than 11% growth over the next five.
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3 Stocks Benefiting from the Online Travel Revolution