Booking actions present good value among travel actions

Consumers around the world have been suppressed in their desire to travel, especially after the mainstream media accused the US economy of approaching a recession throughout 2023. Well, now that the new year has arrived, it is evident that the hypothetical recession has been written off, but we’ll talk about why the economy is overheating later.

If you understand that travel will soon begin to increase like never before, sponsored by the interest rate cuts proposed by the Fed. If so, there will be a gold rush in space. However, not all titles are created equal in this industry; you should avoid buying gold and instead buy shovels to sell to everyone else chasing the breakout hype.

For now, these “shovel” titles can be found with names like TripAdvisor NASDAQ: TRAVEL and airline stocks, but you’re not here for the average plays, are you? Save your notes for Reservation NASDAQ: BKNG as it is the best value stock in the sector today; it has also seen recent analyst upgrades and attracted a special guest to invest in it, but more on that in a bit.

I hadn’t foreseen it

According to the FedWatch tool of ECM Group NASDAQ: ECMTraders are discounting that the Fed will likely cut rates by May or June of this year.

The markets are not going to sit around waiting to move their capital when and if that time comes, so they will likely start making a move early, perhaps even today.

This may be why one of the most followed indicators in the economy, the Employment Situation Report (better known as NFP), has seen an increasing trend in jobs created each month. In fact, for December, the report reported 216,000 jobs added, followed by 353,000 jobs in January (a 63.4% jump!).

If you are a business owner or manager, why should you start hiring more staff? It’s definitely not because you expect a recession to come; in fact, you probably expect exactly the opposite. This wave of hiring gives way to the expectations of managers across the economy who see a booming business ahead.

At the same time, you see guys like Carl Icahn (famous activist investor) dedicating his new interest JetBlue Airways NASDAQ: JBLU not only from a value perspective, but also from the perspective of an imminent recovery in activity in the coming months. But he’s not the only mega investor following this trend.

Michael Burry, the man who defined the 2008 financial crisis, discovered the value of Booking shares, as he invested up to 4.7% of his entire fund in the shares. Understanding that it is the travel industry’s high-margin middleman, he knows that Booking is likely first in line to reap profits.

Hopefully, by now, you understand how higher occupancy, along with expectations of cheaper fares and easier financing in the future, will allow the consumer to resume their travel plans for this year. A trend found in SPDR fund for selected consumer discretionary sectors NYSEARCA: XLY price action.

Icahn decided to focus directly on airlines, while Burry opted for technology stocks by choosing Booking, but is he right?

Why book?

Of course, dozens of stocks can compete with Booking as they provide a platform that makes travel more accessible for the everyday consumer. For reasons that will become clear in a second, analysts and the markets have left you with enough evidence to see how this stock is head and shoulders above the industry.

Starting from the financial data, this stock generates an average ROIC (return on invested capital) rate of approximately 18.0%, a five-year average. In true value investing fashion, Burry knows this stock is a good candidate to grow his investment over time.

This rate is comparable to TripAdvisor’s average rate of 3.0%; from a financial point of view, it would be disqualified as a business that cannot beat inflation. The markets know it, and the analysts know it too; here’s how they let you know.

Analysts expect Booking’s earnings per share to grow 19.6% over the next twelve months, significantly above TripAdvisor analysts’ projections of just a 6.5% increase this year. That’s not the only way they see the growing gap between the two names today.

With a recent bump, analysts of the UBS Group New York Stock Exchange: UBS see Booking shares rise to the $4,200 price target. This view directly implies a 17.3% upside from today’s prices. They’re comparing that to TripAdvisor’s stock price target of $21.6 which calls for a 19.3% downside from where the stock trades today.

Before you consider UBS Group, you’ll want to hear this.

MarketBeat tracks Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and UBS Group wasn’t on the list.

While UBS Group currently has a “Hold” rating among analysts, top analysts believe these five stocks are better buys.

View the five stocks here