After a 30% fall year-to-date (YTD), at the current price of around $130 per share, we believe Expedia stock (NASDAQ: EXPE) could see a rebound. EXPE stock has declined from $185 to $130 YTD, underperforming the broader indices, with the S&P falling 14% over the same period. The company’s stock is negatively impacted by geopolitical tensions, inflation, and slowing economic growth. Despite Expedia beating analysts’ top-and bottom-line consensus estimates in recent Q1 2022, investors don’t seem convinced that the company has fully bounced back from the pandemic. The total Q1 gross bookings were up 58% year-over-year (y-o-y) to $24.4 billion, but they were still 17% down from the first quarter of 2019. Furthermore, it continues to report a loss in adjusted earnings per share to $0.47 in Q1. However, that was an improvement over the company’s loss of $2.02 per share in the year-ago quarter.
Expedia’s Q1 revenue climbed 81% y-o-y to $2.3 billion. The majority of Expedia’s revenue came from lodging, which was up 78% y-o-y. In addition, the travel company saw significant growth in advertising and media revenue, and air-related sales grew 50% over last year. Moreover, the adjusted pre-tax operating losses were the same as three years ago, demonstrating Expedia’s ability to control its costs even with weaker revenue.
We have updated our model following the Q1 release. We forecast Expedia’s Revenue to be $11.9 billion for the full year 2022, up 39% y-o-y. Looking at the bottom line, we now forecast EPS to come in at $7.32. Given the changes to our revenues and earnings forecast, we have revised our Expedia’s Valuation to $144 per share, based on $7.32 expected EPS and a 19.7x P/E multiple for fiscal 2022 – almost 10% higher than the current market price. We believe that the company’s stock appears cheap at the current levels.
We believe that the pent-up travel demand after almost two years of deeply depressed travel volume will set the path for 2022. The company shared its sales trends by month on a conference call with investors, explaining that hotel bookings were down by 11% in January, but up by 8% in February, 7% in March, and 10% in April. In light of these trends, Expedia may see favorable booking growth in Q2. Nevertheless, this recovery in travel may not be as robust as some investors had hoped. In case the inflationary pressure continues to persist for the longer term, it is likely that the broader markets may see lower levels in the near term. And, a further dip in EXPE stock can be used as a buying opportunity for better gains in the long run.
While EXPE stock looks poised for more gains in the future, it is helpful to see how its peers stack up. Check out how Expedia’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
|S&P 500 Return||1%||-13%||86%|
|Trefis Multi-Strategy Portfolio||2%||-18%||224%|
 Month-to-date and year-to-date as of 6/9/2022
 Cumulative total returns since the end of 2016