3 Travel Stocks to Watch Heading Into the Holidays

Key Points

• A strong outlook for earnings growth and margin expansion supports Expedia's stock valuation despite trading above consensus targets.
• Profit-taking has pressured Royal Caribbean stock, but analysts see upside fueled by strong demand, a healthier balance sheet, and rising dividends.
• Fuel hedging and strong earnings growth projections position Southwest Airlines well if holiday travel demand meets expectations.

The calendar just turned to fall, but for investors, it’s time to think about the holiday travel season and what it could mean for travel stocks. A recent report by TravelAge West suggests that travel and entertainment spending will increase by 1%, bucking a broader trend to lower spending in other areas, such as gifts. 

But even with the potential for lower interest rates, consumers will still be looking for value. The same should be true of investors, who may find some bargains in the travel sector. That’s the case with these three travel stocks, which balance opportunity and risk heading into the holiday season. 

Expedia Shows the Distinction Between Price and Value

Expedia Group Inc. NASDAQ: EXPE is one of the leading online travel companies. EXPE stock has delivered a total return of 129.6% in the last three years. The stock price growth is slowing a bit in 2025, but it’s still up more than 16% for the year and over 24% in the last three months. 

That surge has pushed EXPE to trade about 4% above its consensus price target, raising concerns about valuation. However, several factors suggest the stock still has room to run, particularly with the holiday travel season approaching.

First, in September, the stock got two bullish price targets of $240 and $250 from Mizuho and BTIG Research, respectively.

Second, it trades at around 17x forward earnings. However, earnings are expected to grow by 20% in the next 12 months, so investors are paying a discount for the company’s future earnings. 

Third, unlike some competitors that issued cautious guidance, Expedia projected strong margin expansion through year-end. This builds on the 24% EBITDA margin expansion reported in its most recent quarter, a trend that could strengthen further as holiday travel bookings increase.

Royal Caribbean: Smooth Sailing After a Pullback

Royal Caribbean Group NYSE: RCL has staged one of the strongest recoveries from the COVID-19 industry shutdown. Over the past three years, the stock has delivered a total return of more than 765% and is up 37% in 2025, powered by resilient travel demand and a balance sheet that management has steadily repaired after the heavy debt load of 2020.

Shares have slipped more than 12% in the past month, reflecting profit-taking after Royal Caribbean surged to an all-time high above $365 following its second-quarter earnings beat. While the consensus price target of $326.95 suggests limited near-term upside from current levels, analyst sentiment remains bullish. Several targets sit near or above $400, pointing to confidence in continued growth.

Royal Caribbean has also strengthened its shareholder appeal by raising its dividend 25% this year. For investors, that combination of strong demand, improving fundamentals, and ongoing capital returns makes RCL a stock worth watching closely heading into the holiday travel season.

Southwest Airlines: Hedging Its Way to Holiday Strength

Southwest Airlines Co. NYSE: LUV is another stock that looks like a value based on future earnings expectations. In the case of Southwest Airlines, analysts are forecasting earnings growth of over 50% in the next 12 months. That makes the company’s forward P/E ratio of 20x something to watch closely. 

Southwest is expected to benefit from rising jet fuel costs. The company is known for its hedging strategy, and lower interest rates are expected to stimulate demand for low-cost, domestic travel, which is the niche that Southwest fills. 

LUV stock is down about 3.5% in 2025 after hitting a 12-month high in July, and shares may have further room to pull back. However, with earnings scheduled for October, holiday travel demand could be a key catalyst. If forward guidance confirms expectations for strong seasonal bookings, Southwest may present an attractive entry point heading into the busiest travel months of the year.