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Wolfe Research analysts are taking a more cautious view on the online travel sector as they believe demand is moderating.
The analysts highlighted three factors driving a more bearish view on the online travel sector.
Travel demand is likely to moderate amidst the macroeconomic slowdown in 2023 and consensus does not appear to reflect the magnitude accurately.
Many online travel companies have ventured into less efficient customer acquisition channels over the last 12-18 months and have seen unit economics erode vs. 2019.
Valuation multiples (near LT averages currently) are likely to be pressured with negative estimate revisions over the next 12-18 months.
More precisely, the analysts downgraded Booking (NASDAQ:BKNG) to Peer Perform from Outperform and Expedia (NASDAQ:EXPE) and Tripadvisor (NASDAQ:TRIP) to Underperform from Peer Perform.
While Booking is still seen as the “best-in-class online travel company with a strong brand, dominant market share, and attractive financial profile,” the analysts are increasingly concerned about the company’s European exposure.
In order for the analysts to get more constructive on the sector, they would like to see “better resiliency to macro slowdown, improvement in unit economics, and margin expansion.”
