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The prospect of a broader recovery for the travel sector could favor Expedia Group Inc. and make Airbnb Inc.’s alternative-accommodations business relatively less attractive, according to an analyst.
Piper Sandler’s Thomas Champion upgraded Expedia’s stock
EXPE
to overweight from neutral Monday, while downgrading Airbnb’s stock
ABNB
to neutral from overweight. Airbnb shares are down 6.2% in Monday trading. Expedia shares are off 1.6%.
Though the omicron variant has sparked concerns, Champion isn’t too worried about the travel sector and said that a “methodical (if non-linear) travel recovery appears underway.” Travelers have become “increasingly ‘desensitized’ to virus headlines, suggesting entry into an endemic phase versus a pandemic,” he continued.
Champion likes Expedia’s positioning in particular: The company has made encouraging changes to its cost structure and could see bookings “inflect positively” during the first quarter.
From a stock perspective, Champion wrote that Expedia has an “undemanding valuation” relative to its online-travel peers. With investors more sensitive to valuation, Expedia could prove “compelling” as it trades at a discount to its peers while leveraged to the same recovery trends.
While Airbnb’s “pure-play” focus on alternative accommodations was beneficial earlier in the pandemic, it could become less attractive “in an environment where customers are interested in a diverse array of travel services that may include air, traditional lodging, and other activities,” Champion wrote.
He also sees Airbnb’s valuation as “stretched.” The stock trades at 12 times estimates for enterprise value to 2023 sales, compared with 5 times for Booking Holding Inc.
BKNG
and 2 times for Expedia.
“In our view, this premium is more difficult to justify based on growth,” he wrote, as Airbnb’s three-year “recovery trajectory doesn’t look that different” from what the other online-travel companies may see.
