Expedia Stock Down 46% YTD, Can It Rebound?

+23.82%
Upside
96.91
Market
120
Trefis
EXPE: Expedia logo
EXPE
Expedia

After a 46% decline year-to-date, at the current price of around $97 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 $97 YTD, underperforming the broader indices, with the S&P falling about 18% 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 third quarter results. The company’s management indicated that it will continue to improve the Expedia app’s user interface. Expedia surpassed its 2019 levels of active loyalty members in August 2022. In fact, new Expedia customers that became loyalty members in the quarter grew by nearly 50% compared to the third quarter of 2019. In addition, the rollout of the verified loyalty program, One Key, is on track for the next year 2023, which will be a big catalyst for continued membership growth. All in all, the company is working to grow its margins in the longer term.

The online travel agency beat revenue estimates in its third-quarter earnings report and gave positive commentary on trends in the future. The company’s revenue increased 22% year-over-year (y-o-y) to $3.62 billion. Booked room nights rose 25% to 81.6 million, driving gross bookings up 28% to $24 billion. On the bottom line, adjusted earnings per share rose 15% y-o-y to $4.05, which was below the consensus at $4.12. In addition, EXPE’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) topped $1 billion for the first time, increasing 26% to $1.08 billion. Expedia’s management did not give formal guidance, but said on the earnings call that strong demand has continued into Q4 as consumers prioritize travel over other discretionary categories. It also said that bookings for the next year 2023 were outpacing 2019 levels.

We have revised Expedia’s valuation to $120 per share, based on a $7.19 expected adjusted EPS and a 16.7x P/E multiple for the fiscal year 2022 – almost 24% 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.

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Returns Nov 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 EXPE Return 4% -46% -14%
 S&P 500 Return 2% -17% 76%
 Trefis Multi-Strategy Portfolio 2% -21% 213%

[1] Month-to-date and year-to-date as of 11/22/2022
[2] Cumulative total returns since the end of 2016

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