Despite both companies delivering positive earnings, the tape is telling two different stories
In this article, we’re going to look at Expedia (NASDAQ:EXPE) and Booking Holdings (NASDAQ:BKNG). These are two of the titans of the travel sector. Both reported earnings this week so it’s a good time to look at which of these stocks, if any, is a good buy in this volatile market.
The charts of both stocks since the pandemic tell a similar story. There was a sharp sell-off. Then there was a sharp recovery as investors suspected that pent-up demand would be unleashed with the arrival of Covid-19 vaccines. Then in 2021, the stocks moved in a choppy fashion as the world dealt with first the delta and then the omicron variant of the coronavirus.
That brings us to 2022. This was supposed to be the year when travel, at least leisure travel, got back to nearly pre-pandemic levels. And both companies suggest that demand is strong.
What Did the Earnings Reports Say?
Expedia reported first and reported negative earnings per share of 47 cents which was a 24% beat over the consensus estimate for a loss per share of 62 cents. Revenue came in as a slight beat with the company reporting $2.25 billion as opposed to the estimate of $2.23 billion.
This news along with the company’s bullish guidance lifted EXPE stock along with the stocks of the entire sectors. And that included Booking Holdings stock. However, both stocks gave up those gains as part of the broader market sell-off in advance of the Federal Reserve’s decision on interest rates. This wouldn’t be the first time EXPE stock had the misfortune of reporting positive earnings in a bearish week.
However, when Booking Holdings reported strong earnings on May 5, BKNG stock moved sharply higher while EXPE stock fell hard. Some suggest this was just a case of the stock getting caught in the broad sell-off hitting the market. But there was also some concern when Hilton (NYSE:HLT) gave a forecast for softer demand that contradicted the bullish sentiment.
Will Travel Demand Remain Strong?
This is the question that investors must answer for themselves. The Federal Reserve is making no secret of its intention to suppress demand. However, society has been shifting to an experience economy for many years. The pandemic temporarily swung the pendulum in the opposite direction. However, it appears many consumers kept a healthy amount of savings in reserve for post-pandemic travel.
And both companies are saying summer travel demand remains strong. But what happens after that? By the time summer arrives, consumers will be feeling the effect of what will likely be another 50 basis point interest rate hike. But as this is happening, consumers won’t be experiencing much relief at the pump or at the grocery store.
And the Winner Is...?
This is a tough one. Both companies are getting bullish price target increases since delivering earnings. And due to their acquisitions, it’s likely travelers use one or both companies for their travel needs. Both companies reach into all sectors of the travel industry. So should we experience a downturn in travel, it will affect both companies relatively equally.
I’ll put it this way. If there’s any bullish news for the economy, both stocks should move higher. However, I like Booking Holdings margins a little better. But if you’re an investor looking to make a short-term move, I’d give the nod to EXPE stock based on the current chart action. As of this writing, Expedia does look oversold from a purely technical standpoint.
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