Expedia (NASDAQ: EXPE), a travel company providing everything from airline tickets, hotel rooms, and car rentals, to cruises, is scheduled to announce its fiscal third-quarter results on Thursday, November 2. We expect Expedia’s stock to likely trade higher with revenues and earnings beating consensus estimates marginally. The company is benefiting from travel demand that has remained resilient despite macro headwinds. The B2B segment has outperformed Expedia’s retail side in terms of growth, while also driving margins higher. Looking ahead, EXPE reiterated its full-year outlook of double-digit top-line growth with margin expansion. In Q3, it expects year-over-year gross bookings growth to accelerate to the high single-digits. The company also expects Q3 revenue growth to be lower than gross bookings growth, driven by the prior quarter’s reduced verbal bookings converting to stays.
EXPE stock has faced a notable decline of 25% from levels of $130 in early January 2021 to around $95 now, vs. an increase of about 10% for the S&P 500 over this roughly 3-year period. However, the decrease in EXPE stock has been far from consistent. Returns for the stock were 36% in 2021, -52% in 2022, and 6% in 2023 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 7% in 2023 (YTD) – indicating that EXPE underperformed the S&P in 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and TM, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could EXPE face a similar situation as it did in 2022 and 2023 and underperform the S&P over the next 12 months – or will it see a recovery?
Our forecast indicates that Expedia’s valuation is $109 per share, which is 15% higher than the current market price. Look at our interactive dashboard analysis on Expedia Earnings Preview: What To Expect in Q3? for more details.
(1) Revenues expected to be slightly ahead of the consensus estimates
Trefis estimates Expedia’s Q3 2023 revenues to be around $2.7 Bil, slightly higher than the consensus estimate. The online travel agency fell short of revenue estimates but beat the earnings estimates in its second-quarter earnings report. The company’s revenue increased 6% year-over-year (y-o-y) to $3.36 billion. Booked room nights rose 9% to $89.7 million, driving gross bookings up 5% to around $27.3 billion. For the full year of 2023, we expect Expedia Revenues to grow 11% y-o-y to $12.9 billion.
Also, the U.S. unemployment rate remained at 3.8% (as of Sept 2024) and the employment cost index (measuring the growth of labor compensation) rose 1.0% through the June-ending quarter, easing fears of a deeper economic slowdown. Both of these factors point to an improvement in Expedia’s upcoming results going forward.
(2) EPS likely to beat consensus estimates marginally
Expedia’s Q3 2023 earnings per share (EPS) is expected to come in at $1.64 as per Trefis analysis, marginally missing the consensus estimate. On the bottom line, adjusted earnings per share rose 48% y-o-y to $2.89. Also, EXPE’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $747 million, growing 15% y-o-y.
(3) Stock price estimate higher than the current market price
Going by our Expedia’s Valuation, with an EPS estimate of around $9.56 and a P/E multiple of around 11.4x in fiscal 2023, this translates into a price of $109, which 15% higher than the current market price.
It is helpful to see how its peers stack up. EXPE Peers shows how Expedia compares against its peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
|S&P 500 Return||-4%||7%||84%|
|Trefis Reinforced Value Portfolio||-5%||17%||500%|
 Month-to-date and year-to-date as of 10/31/2023
 Cumulative total returns since the end of 2016