April is here, and spring break stocks are ready for takeoff. With robust consumer spending and pent-up travel demand, vacation bookings are skyrocketing. Projections indicate a significant uptick in travel volumes for the upcoming months. And, recent data shows 64% of Americans are planning trips in the early weeks of spring alone. The expected spend per person is likely to exceed $1,750.
So far in 2024, the US Global Jets ETF (NYSEARCA:JETS) which invests in major airlines, online travel agencies, and hospitality companies, has gained over 11%. This surpasses the 10% rise in the S&P 500 Index. With the anticipated travel boom on the horizon, let’s explore three spring break stocks poised to make the most of this flourishing trend.
Avis Budget Group (CAR)
The management of Avis Budget Group (NASDAQ:CAR) faced headwinds during the fourth quarter due to high interest rates and weak used vehicle prices. It reported downbeat fourth quarter results, with flat year-over-year (YOY) revenue of $2.8 billion. So this prompted investor concerns. Additionally, higher interest expenses meant increasing fleet costs. As a result, adjusted earnings per share (EPS) declined 30% YOY to $7.10.
Yet, industry analysts remain optimistic, projecting Avis Budget Groupt to be a key beneficiary of resurgent travel spending as interest rates decline. This optimism reflects Bank of America’s (NYSE:BAC) recent initiation of coverage with a bullish $170 price target. The bank is projecting a strong earnings recovery for Avis, benefiting from steady pricing and efficiency efforts.
Yet, Avis stock crashing 30% year to date (YTD), it now offers an attractive entry point. Shares are trading at a significant discount compared to peers, at 7.1 times forward earnings and 0.4 times trailing sales. Moreover, the stock presents a 40% upside potential, based on average analysts’ price target of $177.50.
Booking Holdings (BKNG)
The second pick is Booking Holdings (NASDAQ:BKNG), the world’s leading online travel services provider. The company boasts diverse travel brands like Booking.com, Priceline, Agoda, Kayak, and OpenTable, with robust profitability.
Fourth quarter metrics highlight BKNG’s strong market position. Gross travel bookings surged 16% YOY, leading to a 18% increase in revenue to $4.8 billion. Non-GAAP EPS jumped 29% to $32.00, showcasing its operating leverage as travel volumes recover. In a strategic move likely to attract income-oriented investors, its board initiated its first-ever quarterly dividend of $8.75 per share.
Looking ahead, BKNG prioritizes vertical integration, expansion of its Genius loyalty program and further AI integration. Notably, Booking Holding’s AI Trip Planner personalizes travel recommendations and caters to individual customer needs. Analysts are forecasting continued double-digit earnings growth over the next three years.
As a result, BKNG stock has returned 3% YTD. Shares trade at a valuation at 20.7 times forward earnings and 6.2 times trailing sales. Finally, analysts are forecasting a 12-month price target of $3,950, implying a 10% upside from current levels.
Expedia Group (EXPE)
The travel powerhouse operating Expedia.com, Hotels.com, Vrbo and Egencia is Expedia (NASDAQ:EXPE). The company concluded a strong 2023 by reducing long-term debt and bolstering cash flows. However, a surprise change of CEO cast a shadow over the financial results, initially leading to a sell-off in stock.
The travel company’s Q4 results were solid, with revenue and profitability accelerating from the previous quarter. Revenue grew 10% YOY to $2.9 billion, while adjusted EPS jumped 37% YOY to $1.72, fueled by strong growth in its business-to-business segment.
Additionally, Expedia strategically focuses on its merchant model, leveraging technology through partnerships to market travel packages. Its strong brand portfolio, global reach and commitment to efficiency gains position EXPE to capitalize on the resurgent travel demand.
So far in the year, Expedia stock has slipped close to 12%. As a result, the shares offer better value, trading at a price-to-earnings (P/E) ratio of 14.7 and a price-to-sales ratio of just 1.5. Finally, Wall Street analysts have a 12-month price target of $157.50, suggesting potential upside of 14% from current levels.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
