Expedia Sales Up 20%, But Stock Down. Why?

+5.84%
Upside
138
Market
146
Trefis
EXPE: Expedia logo
EXPE
Expedia

Expedia’s stock (NASDAQ: EXPE) lost about 8% of its value since the end of 2017 through 2019, with the stock price dropping from $117 to $108. But what went wrong for the company to see a drop in stock price, despite revenue growth of close to 20% over the last two years? As it turns out, the company saw a nearly 40% decline in its P/E multiple during this period. The factor impacting Expedia’s multiple contraction was the increasing pressure from Google in advertising and nimble startups such as Airbnb. Our interactive dashboard Why Is There A Mismatch In The Rate At Which Expedia’s Revenues And Stock Price Have Changed? gives a detailed picture of how stock and revenue moved for the company over recent years.

Driven by a 20% jump in Expedia’s revenues and a 3% decline in share count, coupled with nearly 27% growth in net margin, Expedia’s earnings per share (EPS) improved from $2.49 in 2017 to $3.84 to 2019. Despite this, Expedia’s stock price declined during this period, as the market became skeptical about the company’s future performance due to increasing competitive pressures. The P/E ratio contracted from over 47x in 2017 to 28x in 2019 – down nearly 40%.

Relevant Articles
  1. Expedia Stock is Up 75% Since 2023. Where Is It Headed Post Q4?
  2. What To Expect From Expedia’s Q3 After Stock Up 8% This Year?
  3. Can Expedia Stock Return To Pre-Inflation Shock Highs?
  4. Can Expedia’s Stock Rebound After Falling 50% Over The Last Year?
  5. Expedia Stock To Likely See Little Movement Post Q4
  6. 28% Gains Left For Expedia Stock?

To add to this, Expedia’s P/E contracted further to about 22x currently, as the Covid-19 crisis significantly impacted the online travel industry. Consequently, the travel site stock further declined by 22% in 2020 to $84 (as of June 18th). The company’s revenues declined 15% year-over-year (y-o-y) and gross bookings were down 39% y-o-y in Q1. But of course, the pandemic negatively impacted only March month’s performance in the Q1 results. The consensus estimate for the upcoming Q2 signals for an 80% decline in its revenues. The company has been largely hit, as it derives a majority of its revenues from the U.S. – which has recorded the largest numbers of Covid-19 cases across the globe. The next few months will certainly be difficult for Expedia as the travel industry won’t fully recover until a Covid-19 vaccine is administered at scale.

While Expedia’s stock doesn’t have a near term upside, which S&P 500 component stocks have the best chance of outperforming the benchmark index? Our 5 In the S&P 500 That’ll Beat The Index: TWTR, ISRG, NFLX, NOW, V look promising.

Looking for more insights on the travel stocks. See – Can Tripadvisor Sustain The Newly Found Stock Momentum?

In addition, our dashboard forecasting US Covid-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture. Additionally, the complete set of coronavirus impact and timing analyses is available here.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams