Expedia (NASDAQ: EXPE), a travel company providing everything from airline tickets, hotel rooms, car rentals, to cruises, is scheduled to announce its fiscal second-quarter results on Thursday, August 5. We expect Expedia’s stock to likely trade higher due to revenues and earnings beating consensus estimates. Expedia saw a slower decline (as compared to a steep fall last year) in retail, reflecting improvements in leisure travel trends in Q1, particularly in North America. In addition, it saw a 10% increase in revenue per room night in Q1, as it benefited from an increase in the percentage of alternative accommodation (Vrbo) stayed room nights, which have a higher revenue per room night. Although Expedia does not break out Vrbo numbers, the company’s management reported that it benefited from its vacation rental business and domestic business in the U.S. in Q1. Having said that, Covid-19-related restrictions relatively eased in the U.S. during Q2, which accounts for 67% of total Expedia revenues – signaling an improving trend going forward. While Expedia still has a long way to grow its operating metrics similar to 2019 levels, mass vaccinations are definitely helping the travel industry to recover. To add to this, Expedia also announced its intention to sell its corporate business arm, Egencia, to focus better on its core technology and B2B business. This sell-off is a part of Expedia’s move to further streamline operations.
Our forecast indicates that Expedia’s valuation is $184 per share, which is 19% higher than the current market price of around $155. Look at our interactive dashboard analysis on Expedia Pre-Earnings: What To Expect in Q2? for more details.
(1) Revenues expected to be ahead of the consensus estimates
Trefis estimates Expedia’s Q2 2021 revenues to be around $2.1 Bil, 5% higher than the consensus estimate. Expedia Group total revenue in Q1 2021 decreased 44% year-over-year (y-o-y) to $1.2 billion but grew nearly 36% sequentially from $920 million in Q4 2020. Particularly in Q1, the group’s retail segment revenue declined 35%, and its B2B segment’s revenue decreased 62%. As a percentage of total worldwide revenue for Q1 2021, lodging made up 72%, advertising and media accounted for 7%, and air accounted for just 4%, and the rest came from other services. Adjusted EBITDA for the first quarter of 2021 was a loss of $58 million, a decrease of 24% compared to Q1 2020.
For the full year 2021, we expect Expedia revenues to grow 58% y-o-y to $8.2 billion.
(2) EPS likely to beat consensus estimates
Expedia’s Q2 2021 earnings per share (EPS) is expected to come in at a loss of $-0.50 as per Trefis analysis, marginally better than the consensus estimate of -$0.65. The travel company reported earnings at a loss of $4.17 in Q1 as compared to a loss of $9.24 in the same period last year. In the long term, Expedia needs to address its $4.6 billion negative free cash flow in 2020 that compares to $1.6 billion in positive free cash flow the previous year. So, it needs to generate at least $6 billion to return to normalcy, of which it totaled $2 billion in Q1. While Expedia still has $4.3 billion in unrestricted cash and short-term investments and $2 billion in an untapped revolver capacity, reducing its large debt of $8.5 billion will rely heavily on the company’s post-pandemic recovery.
(3) Stock price estimate higher than the current market price
Going by our Expedia’s Valuation, with a revenue per share (RPS) estimate of around $58.40 and P/S multiple of around 3.2x in fiscal 2020, this translates into a price of $184, which is 19% higher than the current market price of around 155.
It is helpful to see how peers stack up. EXPE Stock Comparison With Peers for how Expedia compares against peers on metrics that matter.