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Expedia (EXPE - Free Report) is a Zacks Rank #1 (Strong Buy) that operates as an online travel agency (OTA). For travelers, the company is a household name that allows easy access to flight and lodging options.
The stock has had a bumpy ride since the pandemic but remains stuck at pre-COVID trading levels. A recent pullback might be providing investors with both short and long-term opportunities before the company reports earnings in early August.
About the Company
Expedia was founded in 1996 and is headquartered in Seattle, WA. The company operates through three segments: B2C, B2B, and trivago.
The B2C segment includes Brand Expedia, which offers a range of travel products and services, Hotels.com for lodging, and Vrbo for alternative accommodations. It also encompasses Orbitz, Travelocity, Wotif Group, ebookers, CheapTickets, Hotwire.com, and CarRentals.com.
The B2B segment caters to travel and non-travel companies, including airlines, offline travel agents, online retailers, corporate travel management, and financial institutions. These partners use the company's travel technology to enhance their offerings and market Expedia Group rates and availability.
The trivago segment is a hotel metasearch website that sends referrals to online travel companies and travel service providers.
The stock has Zacks Style Scores of “A” in Value, but “D” in Momentum. The company has a market cap of $17 billion and a Forward PE of 10. The stock pays no dividend.
Q1 Earnings Beat
In early May, Expedia reported earnings of $0.21 per share, surpassing expectations of -$0.37 per share, and revenue of $2.89 billion, exceeding the anticipated $2.81 billion.
Booked room night growth was 7% year-over-year, while gross bookings reached $30.1 billion, a 3% increase.
Adjusted EBITDA rose by 38% to $255 million, with a margin of 8.8%, up from 6.9% the previous year.
The company highlighted that the results met their guidance, with strong performance in the B2B segment, Brand Expedia, and Advertising. However, Vrbo's recovery after re-platforming was slower than expected, impacting gross bookings.
Looking ahead to the second quarter, the company anticipates continued acceleration in the rest of its B2C business but has lowered its full-year guidance due to the slower-than-expected recovery of Vrbo and the current rate of B2C acceleration. They now expect mid to high single-digit top-line growth with margins remaining relatively stable compared to last year.
Investors reacted to the quarter very negatively, taking the stock from $135 to $115 in a day. This drop of 15% was an overreaction, which proved to be a great buying opportunity.
Since the post earnings low under $108, the stock has rallied over 30% to $142, before recently pulling back to $125.
Expedia is set to report Q2 EPS on August 8th. This report is a catalyst for the stock into the end of the year and if the company can show positive momentum the bulls could challenge the recent highs.
After the prior quarter, earnings estimates dropped aggressively, but they have since stabilized. Expectations for the current quarter are $3.18, but the most accurate estimate is at $3.23, giving an Earning ESP of 1.45%.
Oppenheimer recently had a note on Expedia, maintaining an "Outperform" with a price target of $155. The firm highlighted that low B2C expectations seem to be already factored in. Oppenheimer sees potential in leveraging the new CEO's background by focusing more on the growing B2B segment, which saw a 25% year-over-year increase in Q1 despite tough comparisons.
Additionally, the company’s retail media segment, which grew by 46%, benefits from Expedia’s extensive transactional database. Oppenheimer anticipates no changes to the full-year guidance, even with a Q2 beat, and expects Vrbo nights to improve as industry comparisons ease.
They forecast 7% revenue growth overall, with B2C revenue accelerating in the second half of 2024 and B2B revenue growing by 27% for the year. Despite concerns about Vrbo losing market share to Airbnb being structural, they see the stock performing well at 9x 2025 estimated EBITDA, with 2024 estimates showing Hotels and B2B growing by 12% and 25% respectively, along with significant buyback capacity.
Will AI Assistants Help?
OTA companies, such as Expedia and Booking.com, have built AI travel assistants using OpenAI's platform. While it is yet to be determined whether this will help the user experience or bottom line, investors will watch for comments on Expedia’s AI assistant “Romie.”
Expedia says the assistant is designed to “roam’ with travelers and can be invited to join group chats on SMS, iMessage, WhatsApp and then give travel advice and help perform relevant travel searches in the Expedia app.
Romie can also pull travel information from traveler emails and itineraries to suggest restaurants and activities, and monitor weather changes or last-minute disruptions, providing alerts and alternative suggestions.
The Technicals
Early in 2020, before the pandemic the stock was trading around the $120 level. Today are just a few points above that pre-COVID spot.
The stock hit a high of $217 in early 2022 and then fell to $80.
If you look at a chart since 2016, the stock has gone sideways if you take out the spikes higher and lower. Without those outliers, the stock has basically been in a trading range between $100-140. And we are smack dab in the middle of that range.
So, the next earnings report will be crucial for future prices. The bulls need a move over the $130 mark, which is the 200-day moving average. A move over $140 and the resistance from this year is broken and the stock can start trending to the 2022 highs.
Bottom Line
Expedia’s upcoming quarter will be a catalyst for price direction into the end of the year. While the estimates have yet to tick up, there are reasons for investors to believe the quarter will come in better than expected. Moreover, the recent sell-off is providing an entry point that has historically been attractive.
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Bull of the Day: Expedia Group (EXPE)
Expedia (EXPE - Free Report) is a Zacks Rank #1 (Strong Buy) that operates as an online travel agency (OTA). For travelers, the company is a household name that allows easy access to flight and lodging options.
The stock has had a bumpy ride since the pandemic but remains stuck at pre-COVID trading levels. A recent pullback might be providing investors with both short and long-term opportunities before the company reports earnings in early August.
About the Company
Expedia was founded in 1996 and is headquartered in Seattle, WA. The company operates through three segments: B2C, B2B, and trivago.
The B2C segment includes Brand Expedia, which offers a range of travel products and services, Hotels.com for lodging, and Vrbo for alternative accommodations. It also encompasses Orbitz, Travelocity, Wotif Group, ebookers, CheapTickets, Hotwire.com, and CarRentals.com.
The B2B segment caters to travel and non-travel companies, including airlines, offline travel agents, online retailers, corporate travel management, and financial institutions. These partners use the company's travel technology to enhance their offerings and market Expedia Group rates and availability.
The trivago segment is a hotel metasearch website that sends referrals to online travel companies and travel service providers.
The stock has Zacks Style Scores of “A” in Value, but “D” in Momentum. The company has a market cap of $17 billion and a Forward PE of 10. The stock pays no dividend.
Q1 Earnings Beat
In early May, Expedia reported earnings of $0.21 per share, surpassing expectations of -$0.37 per share, and revenue of $2.89 billion, exceeding the anticipated $2.81 billion.
Booked room night growth was 7% year-over-year, while gross bookings reached $30.1 billion, a 3% increase.
Adjusted EBITDA rose by 38% to $255 million, with a margin of 8.8%, up from 6.9% the previous year.
The company highlighted that the results met their guidance, with strong performance in the B2B segment, Brand Expedia, and Advertising. However, Vrbo's recovery after re-platforming was slower than expected, impacting gross bookings.
Looking ahead to the second quarter, the company anticipates continued acceleration in the rest of its B2C business but has lowered its full-year guidance due to the slower-than-expected recovery of Vrbo and the current rate of B2C acceleration. They now expect mid to high single-digit top-line growth with margins remaining relatively stable compared to last year.
Investors reacted to the quarter very negatively, taking the stock from $135 to $115 in a day. This drop of 15% was an overreaction, which proved to be a great buying opportunity.
Since the post earnings low under $108, the stock has rallied over 30% to $142, before recently pulling back to $125.
Expedia Group, Inc. Price and EPS Surprise
Expedia Group, Inc. price-eps-surprise | Expedia Group, Inc. Quote
Upcoming Earnings
Expedia is set to report Q2 EPS on August 8th. This report is a catalyst for the stock into the end of the year and if the company can show positive momentum the bulls could challenge the recent highs.
After the prior quarter, earnings estimates dropped aggressively, but they have since stabilized. Expectations for the current quarter are $3.18, but the most accurate estimate is at $3.23, giving an Earning ESP of 1.45%.
Oppenheimer recently had a note on Expedia, maintaining an "Outperform" with a price target of $155. The firm highlighted that low B2C expectations seem to be already factored in. Oppenheimer sees potential in leveraging the new CEO's background by focusing more on the growing B2B segment, which saw a 25% year-over-year increase in Q1 despite tough comparisons.
Additionally, the company’s retail media segment, which grew by 46%, benefits from Expedia’s extensive transactional database. Oppenheimer anticipates no changes to the full-year guidance, even with a Q2 beat, and expects Vrbo nights to improve as industry comparisons ease.
They forecast 7% revenue growth overall, with B2C revenue accelerating in the second half of 2024 and B2B revenue growing by 27% for the year. Despite concerns about Vrbo losing market share to Airbnb being structural, they see the stock performing well at 9x 2025 estimated EBITDA, with 2024 estimates showing Hotels and B2B growing by 12% and 25% respectively, along with significant buyback capacity.
Will AI Assistants Help?
OTA companies, such as Expedia and Booking.com, have built AI travel assistants using OpenAI's platform. While it is yet to be determined whether this will help the user experience or bottom line, investors will watch for comments on Expedia’s AI assistant “Romie.”
Expedia says the assistant is designed to “roam’ with travelers and can be invited to join group chats on SMS, iMessage, WhatsApp and then give travel advice and help perform relevant travel searches in the Expedia app.
Romie can also pull travel information from traveler emails and itineraries to suggest restaurants and activities, and monitor weather changes or last-minute disruptions, providing alerts and alternative suggestions.
The Technicals
Early in 2020, before the pandemic the stock was trading around the $120 level. Today are just a few points above that pre-COVID spot.
The stock hit a high of $217 in early 2022 and then fell to $80.
If you look at a chart since 2016, the stock has gone sideways if you take out the spikes higher and lower. Without those outliers, the stock has basically been in a trading range between $100-140. And we are smack dab in the middle of that range.
So, the next earnings report will be crucial for future prices. The bulls need a move over the $130 mark, which is the 200-day moving average. A move over $140 and the resistance from this year is broken and the stock can start trending to the 2022 highs.
Bottom Line
Expedia’s upcoming quarter will be a catalyst for price direction into the end of the year. While the estimates have yet to tick up, there are reasons for investors to believe the quarter will come in better than expected. Moreover, the recent sell-off is providing an entry point that has historically been attractive.
.