Can Expedia Stock Rebound After Almost A 40% Decline This Year?

+36.69%
Upside
91.26
Market
125
Trefis
EXPE: Expedia logo
EXPE
Expedia

After a 38% decline year-to-date, at the current price of around $114 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 modest rebound. EXPE stock has declined from around $185 to $114 YTD, underperforming the broader indices, with the S&P falling about 11% 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. Despite these macro headwinds, the company saw strong travel demand in the second quarter results. That said, a company record was set in lodging bookings and Q2 revenue exceeded pre-pandemic 2019 levels. The company’s management indicated that it will focus more on improving the Expedia app’s user interface. In addition to spending more on marketing, Expedia also plans to launch its new loyalty program One Key. All in all, the company is working to grow its margins in the longer-term.

In Q2, Expedia’s revenues grew 51% year-over-year (y-o-y) to $3.18 billion, driven by a 26% y-o-y jump in gross bookings. The travel company continued its GAAP net loss in Q2 as well, driven by a 13% jump in the cost of sales due to higher merchant processing fees, customer service costs, and cloud costs as a result of increased transaction volume. However, the company’s lodging gross bookings were up 8% versus the second quarter of 2019. If we look at the sales trend by month, Expedia’s lodging gross bookings were up 9% in April compared to the same period in 2019, up 9% in May, and 5% in June. It should be noted that there was some choppiness early in the month of July, likely due to airport and airline disruptions – which could lead to July bookings landing in line with 2019 levels. The company’s earnings release did not include guidance for the third quarter.

We have revised Expedia’s valuation to $125 per share, based on a $7.00 expected adjusted EPS and a 17.8x P/E multiple for the fiscal year 2022 – almost 10% higher than the current market price. We forecast Expedia’s Revenues to be around $12 billion for the fiscal year 2022, up 37% 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 38% 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 Aug 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 EXPE Return 7% -37% 0%
 S&P 500 Return 4% -10% 91%
 Trefis Multi-Strategy Portfolio 5% -9% 258%

[1] Month-to-date and year-to-date as of 8/18/2022
[2] Cumulative total returns since the end of 2016

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