How Will Expedia Perform In 2019?

by Trefis Team
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Expedia (NASDAQ: EXPE) delivered a strong performance in 2018, driven by robust gross bookings from both HomeAway and Egencia. In 2018, the company’s revenues grew 12% year-over-year (y-o-y) to 11.2 billion, driven by 10% y-o-y growth in overall gross bookings. The top-line growth was also driven by significant growth across night rooms booked and increased air ticket revenues. In addition, Expedia’s adjusted EBITDA grew 15% during this period, largely due to the company’s efforts to optimize its direct marketing spend. Going forward, we expect the company to sustain this momentum and generate around $12.5 billion in revenues in 2019, which would represent year-on-year growth of nearly 11%.

Expedia’s stock price is up more than 10% since the beginning of 2019. We have maintained our price estimate for Expedia at $129, which is slightly ahead of the current market price. We have created an interactive dashboard on How Did Expedia Fare In 2018, And What Can We Expect In Fiscal 2019, which outlines our forecasts for the company. You can modify our forecasts to see the impact any changes would have on the company’s earnings and valuation, and see all of our Information Technology company data here.

FY 2019 Outlook

Looking at full-year 2019 revenues, we forecast $9.6 billion in revenues for the core OTA business, nearly $1.3 billion for the HomeAway business, over $900 million for Trivago, and over $600 million for Egencia. We estimate a take rate of around 11% for 2019, which is similar to the figure for the past few years. This, combined with a gross booking forecast of $87.5 billion, should help generate OTA revenue of $9.6 billion in 2019. In addition, Expedia now expects its consolidated adjusted EBITDA growth to be in the range of 10-15% in 2019. To add to that, Expedia also expects cloud expenses to increase from $141 million in 2018 to around $250 million in 2019. The company continues to leverage its data-driven approach to marketing optimization while continuing to aggressively drive its global expansion plans. We expect this to drive the company’s value in the near term.

Turning to Expedia’s expenses – we expect the company’s expenses to increase by nearly 4% in 2019. Among the expense components, the company expects a significant decline in cost of sales and technology and content expenses compared to 2018. This is largely due to increased investment in cloud, customer operations cost related to new details at Expedia Partner Solutions, HomeAway’s shift to becoming a merchant of record on more of its transactions, and continued investments in product enhancements across the company. On the other hand, the company expects SG&A costs to increase in 2019, reflecting the cost rationalization efforts at Trivago.

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