Cramer Online Travel Stocks - Miles Apart
"Online travel is a $300 billion business and growing rapidly," said Jim Cramer. That, however, does not mean buy all of the stocks in the space.
Although online travel sites may all seem the same, Cramer said they're actually 'miles apart' and the space is fraught with land mines.
"There are enemies at the gate," Cramer said. He reminds that Google plans to build a presence in the industry, and he worries that other heavyweights could follow.
"That's why I want to stick with the online travel firm with the best execution."
And that company, Cramer said, is Priceline.
Not only does Cramer like Priceline's track record he's particularly excited by the company's international strategy.
Cramer believes that one of the big opportunities in online travel is the ability to win business away from conventional travel agents. Although that trend is well underway in the US it's at its infancy in other parts of the world.
"And Priceline already has a huge presence in Europe," said Cramer enthusiastically, "It accounts for 60% of their bookings, and they have a rapidly expanding presence in Asia."
Also Cramer thinks the company's decision to purchase Kayak will goose the bottom line.
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"Kayak has the best mobile presence in the business, with smartphone apps that are beloved by the people who use them. I think this could be huge going forward, because we know that people are increasingly doing their online activities from mobile devices rather than desktops."
In case you're wondering about other stocks in the space Cramer talked about some of them too.
Cramer called Expedia a solid second.
"The company is still very much tied to the slower growing U.S. market, which accounted for 59% of Expedia's bookings in 2012, although their international presence has been expanding."
Orbitz however, Cramer would avoid.
"I know the stock has been roaring lately, but it's only because people who feared the company was a goner have realized that this single-digit name actually has a viable business, one that's about to swing to a profit. Still, Orbitz is the dog of the group with the slowest growth and the worst numbers."
And Cramer isn't nearly as excited about the ancillary online travel such as TripAdvisor or HomeAway.
"I love to use TripAdvisor, but for me, this is a business with incredibly low barriers to entry—I don't see why Google or Yahoo couldn't move into this space and crush them," Cramer said.
"Meanwhile HomeAway is trading at 47 times earnings, which is pretty extended even with HomeAway's 29% growth rate. I like this company, but I want the stock cool off."
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