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

by Trefis Team
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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%.

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

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