Travel companies likely to see accelerated revenue growth and expanded EBITDA margins
The tourism sector has been the most affected by the coronavirus disease (Covid19) pandemic. But now, with the global travel and tourism boom, tourism stocks are popular stocks. This view applies both in the short and long term.
In fact, international tourism ended 2023 at 88% of pre-pandemic levels. Additionally, international tourism reached $1.4 trillion last year. Despite macroeconomic headwinds, the forecast for 2024 is rosy.
Furthermore, a possible rate cut is expected from the end of 2024 to 2025, which will have a positive impact on global growth. Therefore, many expect 2025 to be another good year for travel and tourism.
Let’s explore three tourism stocks that are likely to double by the end of 2025 as positive tailwinds are blowing in the industry.
Expedia Group (EXPE)
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Expedia Group (NASDAQ:EXPE) is one of the most undervalued tourism stocks to buy. It trades at a price-to-earnings ratio of 11 times, even after a 41% increase over the past six months. With likely strong quarterly results, I’m bullish for the stock to double his by the end of 2025.
Expedia Group operates as an online travel company with a significant global presence. The company has made a strong comeback after the pandemic, with sales in Q4 2023 being the highest ever for a fourth quarter.
Additionally, for the full year, sales increased 10% to $12.8 billion. Adjusted EBITDA for the period increased 14% to $2.7 billion. Operating leverage is likely to sustain EBITDA margin expansion this year.
In particular, Expedia Group is actively adding new partners to its global travel ecosystem. With positive tailwinds in the industry, EXPE is likely to accelerate its growth in the coming years.
Make My Trip (MMYT)
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MakeMyTrip (NASDAQ:MMYT) stock has soared over the past 12 months. However, the India-based online tourism company’s rise came from highly oversold levels. I remain bullish on his MMYT stock given its growth potential.
Importantly, India is likely to become one of the fastest growing economies. This will not only be the case in 2024, but also for the next 10 years. With favorable demographics and a growing middle class, the tourism sector is poised for a boom.
Additionally, estimates suggest that Indian travelers are likely to take an additional 5 billion trips by 2030. Moreover, spending on travel and tourism is expected to reach $410 billion by the end of 2020. Clearly, MMYT stock has a huge opportunity and could be a multi-bagger.
Investors are focused on sustained improvement in operating margins post-pandemic. With healthy growth, this improvement is likely to continue, supporting stock price appreciation. Moreover, with its leading position in the Indian online travel market, MakeMyTrip will see accelerated growth in the coming years.
TripAdvisor (TRIP)
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TripAdvisor (NASDAQ:TRIP) is another interesting tourism stock. The stock trades at an attractive forward price/earnings ratio of 17 times. Strong financials are likely to sustain TRIP stock’s upward momentum.
TripAdvisor owns and operates a portfolio of travel media brands and businesses, including TripAdvisor, Viator, and TheFork. In 2023, the company reported sales and EBITDA of $1.8 billion and $334 million, respectively.
In fact, TripAdvisor Brands reported an EBITDA margin of 34% in the prior year. Viator contributed 38% of total revenue but did not report an EBITDA profit or loss.
Expanding Viator’s operating margins will have a significant impact on its overall profit margins and cash flow. TripAdvisor’s revenue growth was 7% year over year (YOY), while Viator grew his 49%. Therefore, the largest increase in cash flow may be the one that should be given to the company.
On the date of publication, Faisal Humayun did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in credit research, equity research, and financial modeling. Faisal has written over 1,500 stock-specific articles, focusing on the technology, energy and commodity sectors.
