Air Travel Stocks Face Uncertain Future in 2024

Travel stocks experienced a significant surge in 2023 as travelers flocked to new destinations in large numbers. However, Barclays analyst Trevor Young has raised doubts about the industry's ability to replicate its outstanding performance in the coming year.

This uncertainty could potentially impact the shares of Airbnb and Expedia, as highlighted by Young. On Tuesday, he downgraded Airbnb's shares from Equal Weight to Underweight, and Expedia's shares from Overweight to Equal Weight. Young explained his decision in a research note, stating that while online travel companies delivered strong returns in 2023, he expected consumer and travel spending to stabilize in the upcoming year.

"We foresee a slowdown in online travel growth moving forward, as the 'pent-up' demand for travel will eventually be exhausted—especially considering the increasing financial strain on consumers," Young explained.

In addition to the downgrade, Young also lowered Airbnb's price target to $100 from $135. This represents a decrease of 27% from its opening price of $137.90 on Tuesday. The analyst acknowledged that Airbnb holds a dominant position in the alternative accommodations market but expressed concerns about the numerous regulatory and consumer challenges it may face in the future. Young specifically mentioned frustrations with excessive fees and inconsistent cleaning policies, which have negatively influenced the end-consumer experience.

As a result of the downgrade, Airbnb's stock experienced a 2.3% decline, reaching $140.63 in afternoon trading. Despite this, the company has still witnessed a substantial 65% increase in its stock value over the course of the year.

On the other hand, while Young removed his buy rating for Expedia, he did raise the company's price target from $136 to $150.

"EXPE has had an impressive performance in 2023, but considering the potential slowdown in bookings and revenue growth as travel softens, it appears wise to secure some profits and remain cautious," Young elaborated.

Expedia's stock, which has also enjoyed a 65% gain this year, experienced a 2.4% dip on Tuesday, reaching $144.80.

In summary, while the travel industry experienced a remarkable upsurge in 2023, the coming year presents uncertainties. Barclays analyst Trevor Young's analysis suggests a potential slowdown in online travel growth due to consumer financial pressures and the fulfillment of pent-up travel demand. Young's decision to downgrade Airbnb and Expedia reflects these concerns. However, both companies continue to hold strategic positions within the industry despite the challenges they may face.