Expedia Stock Down 40% in Six Months, What’s Next?

+30.47%
Upside
95.61
Market
125
Trefis
EXPE: Expedia logo
EXPE
Expedia

After a 40% decline over the last six months, at the current price of around $102 per share, we believe Expedia’s stock (NASDAQ: EXPE), a travel company providing everything from airline tickets, to hotel rooms, and car rentals – could see a rebound. EXPE stock has declined from around $171 to $102 YTD, underperforming the broader indices, with the S&P falling about 16% over the same period. The company’s stock traded lower as anxiety over a potential recession, staffing issues with airlines, and higher interest rates have swept over the entire travel sector. The broader concern over the global economy’s health and renewed Covid restrictions in some regions of China gave rise to worries that travel demand could decline over the coming quarters after rebounding this summer. Nonetheless, Expedia entered the summer period with good momentum, effectively putting the company in a position to take advantage of rising consumer demand in the second quarter as consumers prioritize leisure travel, which had been neglected for the past two years. Also, the U.S. unemployment rate remained near historic lows at 3.6% (as of May) and the employment cost index (measuring the growth of labor compensation) rose 1.4% through the first quarter, a record growth since 2001. Both of these factors point to an improvement in Expedia’s upcoming results going forward. But how the current macroeconomic condition truly impacts the company’s business will only be clear in EXPE’s second quarter report scheduled in early August.

In Q1, Expedia’s revenues grew 81% year-over-year (y-o-y) to $2.25 billion, driven by a 58% y-o-y jump in gross bookings. However, the company’s gross bookings were still down 17% compared to the pre-pandemic period, and net losses continued in Q1. If we look at the sales trend by month, Expedia’s hotel bookings were down 11% in January compared to the same period in 2019, but up 8% in February, 7% in March, and 10% in April. These trends do imply that the travel rebound will benefit the company in the upcoming second quarter. The company’s Q2 report should likely include monthly sales data through July, giving investors a good picture of demand trends heading into the second half of 2022, as well.

We have revised Expedia’s valuation to $144 per share, based on a $7.32 expected EPS and a 19.7x P/E multiple for the fiscal year 2022 – almost 40% higher than the current market price. We forecast Expedia’s Revenues to be around $12 billion for the fiscal year 2022, up 39% y-o-y. In light of rising interest rates and the threat of recession, the market at the moment is uncertain, but any further decline in the company’s stock could be used as an opportunity to buy the stock.

It is also 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.

With inflation rising and the Fed raising interest rates, Expedia has fallen 43% this year. Can it drop more? See how low can EXPE stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Jul 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 EXPE Return 8% -43% -10%
 S&P 500 Return 6% -16% 79%
 Trefis Multi-Strategy Portfolio 12% -14% 242%

[1] Month-to-date and year-to-date as of 7/22/2022
[2] Cumulative total returns since the end of 2016

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