3 Undervalued Travel Stocks We Like
These names stand to benefit from a resumption of leisure travel -- and are all trading below our fair value estimates.
Fears surrounding the duration and severity of the coronavirus pandemic have weighed on travel stocks, creating opportunity for long-term investors. Today we’re looking at three of our favorite travel names.
Our first pick is Expedia (EXPE). While COVID-19 will stress Expedia's financial health in the near term, we think the firm will maintain its sizable network advantage over the long term once the virus is contained. True, Expedia faces elevated debt leverage in 2020, but we believe it has enough liquidity to operate under anemic demand conditions through 2021. We expect Expedia's network advantage to remain intact and possibly strengthen after the COVID-19 crisis, because we think smaller peers would be challenged to fund the substantial human and operational capital needed to replicate the company's platform. Further, Expedia's new management team is focused on reinvesting cost efficiency into loyalty and user experience, which should support its network advantage. We assign Expedia a narrow Economic Moat Rating and a $127 fair value estimate.