Driven by substantial pent-up demand and relaxed travel restrictions, the travel industry witnessed a spectacular surge during the 2021 holiday season. While the rapid spread of the COVID-19 omicron variant caused the industry to founder briefly, countries worldwide have relaxed their international and domestic travel restrictions on the variant’s mild impact.

Travel (both international and domestic) is expected to gain further traction in 2022, due primarily to pent-up demand. According to a Market Watch report, the global online travel market is expected to grow at a 13.16% CAGR over the next two years to $1.13 trillion by 2023.

Given this backdrop, we think it could be wise to bet on fundamentally sound online travel stocks trivago N.V. (TRVG) and Travelzoo (TZOO).

trivago N.V. (TRVG)

Based in Germany, TRVG and its subsidiaries operate a hotel and accommodation search platform in the United States, Germany, the United Kingdom, Brazil, and internationally. It operates 54 localized websites and apps in 32 languages.

On Oct. 26, 2021, TRVG and HUAWEI announced a partnership to develop travel products for use on the HUAWEI Mobile Services platform. Axel Hefer, TRVG CEO, said, “HUAWEI is a Global leader in mobile devices and technology solutions, and we are excited to partner with them on the development of accommodation solutions as part of their Petal Ecosystem. Jointly driving the functionality and adoption of Petal Search, Petal Maps and the AppGallery will allow us to contribute to the development of travel solutions going forward.”

TRVG’s total revenue increased 128.7% year-over-year to €138.6 million ($157.95 million) for its fiscal third quarter, ended Sept. 30, 2021. Its net income came in at €5.5 million ($6.27 million), versus a €2.3 million ($2.62 million) loss in the year-ago period. Also, its adjusted EBITDA was t €15.5 million ($17.66 million), up 154.1% year-over-year.

Analysts expect TRVG’s revenue to increase 71.5% year-over-year to $707.3 million in its fiscal 2022. Its EPS is also expected to increase 166.7% year-over-year to $0.02 in its fiscal 2022. In addition, it has surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past month, the stock has gained 4.8% in price to close yesterday’s trading session at $2.19.

TRVG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

TRVG has a B grade for Growth, Sentiment, and Quality. Within the Internet industry, it is ranked #4 out of 77 stocks. Click here to see TRVG’s ratings for Value, Momentum, and Stability also.

Travelzoo (TZOO)

TZOO is an Internet media company that provides travel, entertainment, and local deals from travel and entertainment companies and local businesses in the Asia Pacific, Europe, and North America.  TZOO is headquartered in New York City.

On Oct. 29, 2021, Holger Bartel said, “We saw robust growth in our revenue and operating profit from Travelzoo in Europe.”

For its fiscal third quarter, ended Sept. 30, 2021, TZOO’s revenues increased 13.8% year-over-year to $15.69 million. In addition, its net income came in at $2.83 million, compared to a $1.23 million loss in the previous period. The company’s EPS was $0.22, compared to a $0.12 loss per share.

TZOO’s revenue is expected to be $88.21 million in its fiscal 2022, representing a 30.7% year-over-year rise. And its EPS is expected to grow 171.8% year-over-year to $1.06 in fiscal 2022. The stock closed yesterday’s trading session at $9.30.

It is no surprise that TZOO has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Quality and a B grade for Growth, Value, and Sentiment.

TZOO is ranked #1 in the Internet industry. Click here to see the additional POWR Ratings for TZOO (Momentum and Stability).

TRVG shares rose $0.03 (+1.37%) in premarket trading Wednesday. Year-to-date, TRVG has gained 1.83%, versus a -3.54% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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