Will 2012 bring another year of "stay-cations?" Not if
is any indication. The purveyor of airline and hotel discounts
recently reported a 35% jump in fourth-quarter sales, to $991
million (compared with a year earlier). And that was in a
seasonally-weak quarter. Sales may hit $1.4 billion by the second
quarter, according to analysts.
Back in mid-December,
I laid out a case
whyshares could quickly surge to $650 or $700 by the end of 2012.
As this chart shows, we're almost there.
Though Priceline.com's stock could easily breach the $700 target I
suggested a few months ago, the travel industry now offers better
bargains for investors. I've been looking for travel-related firms
that do a lot of business in the spring, summer and fall, and have
found a few compelling bargains.
First off, regular readers know that I'm a big fan of
, which is a member of my
$100,000 Real-Money Portfolio
I noted here
, when the weather warms up, demand for Zipcar's vehicles surge
higher. The company looks set to deliver robust results in the June
and September quarters.
Also worth researching...
1. TravelCenters of America (NYSE:
I wrote about this company
at the end of December
. Though it's up 20% since then, it's still quite cheap at a recent
$5, well below the $11 tangible
. This is more of a play on trucking, but the company's 200 rest
stops also attract a lot of consumers that need to tank up on gas
and burgers on their road trips.
2. HomeAway (Nasdaq:
This Austin, Texas-based operator of vacation rental properties was
last June, opening above $40 on its first day of trading.
have pulled back to the mid $20s and now look more like a value
play and less like a frothy IPO.
HomeAway, which operates an eponymously-named website along with
VRBO.com, vacationrentals.com and other sites, is a natural
extension of the recent
crash. Many people bought lavish second homes in the middle of the
last decade and now find themselves financially over-extended. They
could sell those homes, at a likely loss, or they can garner some
rental income on their properties to help offset annual expenses.
It's not a distinctly American phenomenon. HomeAway runs nearly
700,000 listings per year in roughly 150 countries. As a point of
reference, HomeAway has twice as many as listings as its three
largest rivals (TripAdvisor, Wyndham and AirBnB combined).
Consumers love it too. You can often rent an entire house for what
a hotel room costs, or rent a room in someone's home for less money
than a hotel room.
And it's a bigger
than you realize: Goldman Sachs pegs it at $85 billion annually. To
extend an analogy to Priceline.com, Goldman Sachs notes that
HomeAway's potential addressable market is one-fourth the size of
Priceline's, yet Priceline now has a
that is 15 times larger.
HomeAway's massive database creates a powerful virtuous cycle,
known as "network effects." Consumers can find more rental choices
on the company's various sites, driving more traffic. The higher
traffic causes homeowners and property managers to migrate to where
the action resides.
So why are shares well off of their highs? Three reasons...
• Investors got carried away with their growth assumptions after
seeing that the company boosted sales at least 35% in each of the
last five years. Instead, 20% annual growth is a much more
reasonable target, according to management, and analysts were
forced to lower their revenue assumptions as a result.
• A huge lock-up expiration. Roughly 10% of the company's stock was
sold at the IPO. Much of the rest came on to the market in January
and February 2012, and that big spike led many to dump shares in
• Management plans to hike spending on software and other parts of
the technology platform, which will dampen 2012 profits.
are expected to drop from $0.70 per share in 2011 to just $0.47 per
share in 2012.
Risks to Consider:
This is a growing niche that is bound to attract more
competition, and HomeAway will need to fight to maintain
Action to Take -->
Any of the stocks I've mentioned previously in this piece are good
candidates worth further research, but HomeAway is obviously
intriguing to my mind.
Even with the sell-off, shares aren't cheap, trading at more than
40 times projected 2013 profits. But the company appears to have
just scratched the surface on what appears to be one of the
fast-growing sectors in the leisure and lodging industry. With the
share lock-up now expired, more reasonable revenue growth
assumptions in place and a path toward much higher sales and
profits in place by the middle of the decade, this busted IPO
should have a more
You can also follow along with my
$100,000 Real-Money Portfolio
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-- David Sterman
David Sterman does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC owns
shares of ZIP in one or more if its "real money" portfolios.