Down 11% This Year, Will Expedia Stock Recover Following Q1 Results?

-6.54%
Downside
130
Market
122
Trefis
EXPE: Expedia logo
EXPE
Expedia

Expedia (NASDAQ: EXPE), a travel company providing everything from airline tickets, hotel rooms, and car rentals, to cruises, is scheduled to announce its fiscal first-quarter results on Thursday, May 2. We expect Expedia’s stock to likely trade higher with revenues and earnings beating consensus estimates. 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. While demand is expected to be healthy in 2024, the company expects its growth rates to decelerate this year, particularly early in the year as it laps the post-Omicron tailwinds. The company announced CEO Peter Kern is stepping down effective May 13. He will be replaced by Ariane Gorin, currently President of Expedia for Business.

EXPE stock has seen little change, moving slightly from levels of $130 in early January 2021 to around $135 now, vs. an increase of about 35% for the S&P 500 over this roughly 3-year period. Overall, the performance of EXPE stock with respect to the index has been quite volatile. Returns for the stock were 36% in 2021, -52% in 2022, and 73% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that EXPE underperformed the S&P in 2022. 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 underperform the S&P over the next 12 months – or will it see a strong jump?

Our forecast indicates that Expedia’s valuation is $146 per share, which is 8% higher than the current market price. Look at our interactive dashboard analysis on Expedia Earnings Preview: What To Expect in Q1? for more details.

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(1) Revenues expected to be slightly ahead of the consensus estimates

Trefis estimates Expedia’s Q1 2024 revenues to be around $2.8 Bil, slightly above the consensus estimate. In 2023, the company generated record revenue of $12.8 billion, including Q4 revenue of $2.9 billion, which was up 10% year-over-year (y-o-y). Booked room nights increased 9% y-o-y, revenue generated from air bookings fell 7%, lodging revenue improved by 14%, and revenue from advertising and media increased by 16% from the same quarter last year. In addition, the online travel company’s revenue generated by international travel bookings showed a gain of 22%, while revenue from domestic travel bookings increased by just 4%. For the full year of 2024, we expect Expedia Revenues to grow 10% y-o-y to $14.1 billion.

(2) EPS likely to beat consensus estimates 

Expedia’s Q1 2024 earnings per share (EPS) is expected to come in at -$0.20 as per Trefis analysis, beating the consensus estimate. The company’s full-year diluted earnings per share made a huge 145% jump to $5.31 in 2023 compared to 2022.  Expedia’s strong free cash flow levels enabled it to complete its largest-ever level of share repurchases at 2 billion, or over 19 million shares during the year. Higher interest rates provided higher interest income on its cash. In Q4, EXPE earned an adjusted profit of $1.71 from $1.24 in the same quarter last year. Adjusted EBITDA increased by 19% y-o-y to $532 million and the adjusted EBITDA margin expanded by 130 basis points to 18.5%.

(3) Stock price estimate higher than the current market price

Going by our Expedia’s Valuation, with an EPS estimate of around $8.74 and a P/E multiple of around 16.7x in fiscal 2024, this translates into a price of $146, which is 8% 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.

 

Returns May 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 EXPE Return 0% -11% 19%
 S&P 500 Return 0% 6% 125%
 Trefis Reinforced Value Portfolio 0% 0% 610%

[1] Returns as of 5/1/2024
[2] Cumulative total returns since the end of 2016

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