Return to Normal Triggers Return of this Tourism Company’s Profits

Shah Gilani|February 14, 2022

On Thursday, after the close, Expedia Group Inc. (EXPE) posted fourth-quarter results that included a bottom line that blew estimates away.

EXPE reported adjusted earnings of $1.06 per share, which was well above estimates of $0.60, and up from a $2.64 loss in the same period a year ago.

Those are great numbers for a company that relies on tourism and travel – and I’m not surprised, considering the Omicron variant turned out to be far less deadly than initially feared. Despite its exponential rise, people generally felt more comfortable traveling.

Just as important, though, people are tiring of COVID-restrictions and are looking to get back to normal, and traveling is part of that return to “normal”.

Speaking of traveling, gross bookings for the quarter jumped 131%, going well past $17 billion. That helped push revenue up to $2.28 billion, representing a whopping 148% increase over the same period a year ago.

I see those numbers staying elevated, and continuing to grow, as we transition to a more travel-heavy spring and summer.

With that in mind, let’s buy the EXPE June 17, 2022 $210/$220 Call Spread for $4.00 or less. Plan on exiting the EXPE June 17, 2022 $210/$220 Call Spread for a 100% profit or if shares of EXPE close below $180.00.

I’m also watching Zillow Group Inc. (Z), the online real estate firm.

Z released its fourth-quarter report the same day as EXPE to similar effect. The company easily beat estimates, driving shares up as much as 17% in early Friday trading.

Let’s look at the specifics. Its quarterly revenue grew to $3.88 billion, compared with $789 million a year earlier and far higher than analysts’ estimate of $2.98 billion, according to Refinitiv data.

Additionally, the company reported that New York-based Pretium, the second-largest single-family landlord in the U.S., recently acquired more than 800 properties from Zillow for nearly $300 million. The companies also have an agreement on 400 more homes that Pretium is buying for roughly $150 million.

Zillow is now selling properties faster and for more money than anticipated after shutting down its home-flipping operation, known as Zillow Offers.

I think that’s great because it means the company can get back to doing what it does best, developing a housing super-app that brings together all the fragmented pieces of the moving process on one platform.

Even though I like the fourth-quarter’s results and the company’s shift in direction, I think Friday’s move was too much, too fast.

If shares of Z pullback to $51.00 by February 25, 2022, I like buying the Z June 17, 2022 $60$65 Call Spread for $1.75 or less. Plan on exiting the Z June 17, 2022 $60$65 Call Spread for a 100% profit or if shares of Z close below $45.00.

And finally, I’m watching Proto Labs Inc. (PRLB), the Minnesota-based company which operates the world’s fastest digital manufacturing source for prototypes and low-volume production parts.

The PRLB system allows product developers to upload a 3D CAD model any time and receive an automated quote, have digital instructions sent to the production floor, and eventually inspected before being shipped out to customers. And all of that happens in less than 15 days.

That’s a super-fast turnaround, so I’m not surprised customers are using PRLB to prototype new ideas.

On Friday, the company reported very strong Q4/2021 and FY/2021 results and the stock jumped nearly 14% in early Friday trading.

By the numbers, the company reported quarterly revenue and record annual revenue of $123.6 million and $488.1 million, which represented year-over-year increases on 17.5% and 12.4%, respectively.

I like PRLB because they provide a unique service very fast, they make money, and they have a rock-solid balance sheet with $64.34 million in cash versus just $7.21 million in debt.

But the best part about PRLB is that over the last 12 months, shares dropped as much as 78.88% before rebounding 32% over the last 11 sessions.

That’s a solid move, but I still see far more room to the upside.

First, I see the stock trading up to support/resistance at $63.50 and then up to the 200-day moving average at $71.22.

If shares of PRLB trade back down to $56.75 by February 25, let’s buy PRLB July 15, 2022 $60/$65 Call Spread for $2.00 or less. Plan on exiting the PRLB July 15, 2022 $60/$65 Call Spread for a 100% profit or if shares of PRLB close below $52.75.

Cheers,

Shah