Expedia Faces Challenges: Analysts Concerned About Vrbo's Slow Start and B2C Growth
Written by Emily J. Thompson, Senior Investment Analyst
Updated: May 03 2024
0mins
Source: Business Insider
Analyst Recommendations on Expedia Group:
- Benchmark analyst reiterated a Buy rating with a $180 price target, while Wedbush analyst maintained a Neutral rating and lowered the price target.
- Oppenheimer analyst lowered the price target but maintained an Outperform rating, and Mizuho analyst also lowered the price target but maintained a Neutral rating.
- BMO Capital downgraded Expedia from Outperform to Market Perform, and Piper Sandler downgraded it from Overweight to Neutral.
- BofA Securities reiterated a Neutral rating with a reduced price target.
Financial Performance and Guidance:
- Expedia reported first-quarter sales up by 8.4% year-on-year, beating estimates, but faced challenges with Vrbo and core B2C growth.
- Lowered guidance for second-quarter and fiscal 2024 due to slower-than-expected traffic growth at Vrbo and Hotels.com.
- Management expects margin compression in the second quarter and flat adjusted EBITDA margin for the full year as they invest more aggressively.
Impact on Stock and Market Perception:
- Shares were down ~9% after-hours following the revised guidance, reflecting investor concerns.
- Analysts noted that the downside risk now seems limited to macroeconomic factors, and the stock has gained nearly 30% in the last 12 months.
- Concerns about Vrbo adoption, tech migration complexities, and competition from innovative competitors affecting market share valuation.
CEO Transition and Company Strategy:
- Outgoing CEO Kern passing the baton to new CEO Ariane Gorin, who faces challenges with Vrbo recovery and tech improvements.
- Management confirmed lower guidance for the year, impacting the stock price and investor sentiment.
- Analysts are cautious about the company's ability to reaccelerate based on tech re-platforming and Vrbo recovery.
Investment Opportunities:
- Investors can gain exposure to Expedia Group stock through AdvisorShares Hotel ETF and Hennessy Stance ESG ETF.
- Despite challenges, some analysts see potential for growth if certain initiatives like One-Key drive sustainable double-digit growth.
- Expedia Group stock traded lower by 14.2% at $116.77 on the last check Friday.
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Analyst Views on EXPE
Wall Street analysts forecast EXPE stock price to rise
28 Analyst Rating
9 Buy
19 Hold
0 Sell
Moderate Buy
Current: 266.760
Low
220.00
Averages
284.79
High
360.00
Current: 266.760
Low
220.00
Averages
284.79
High
360.00
About EXPE
Expedia Group, Inc. is an online travel company. The Company’s segments include B2C, B2B, and trivago. The B2C segment provides a full range of travel and advertising services to its worldwide customers through a variety of consumer brands including: Expedia.com, Hotels.com, Vrbo, Orbitz, Travelocity, Wotif Group, ebookers, CheapTickets, Hotwire.com and CarRentals.com. The B2B segment fuels a wide range of travel and non-travel companies, including airlines, offline travel agents, online retailers, corporate travel management and financial institutions, who leverage travel technology and tap into its diverse supply to augment their offerings and market Expedia Group rates and availabilities to their travelers. Its trivago segment generates advertising revenue primarily from sending referrals to online travel companies and travel service providers from its hotel metasearch Websites. The trivago is its majority-owned hotel metasearch company, based in Dusseldorf, Germany.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Housing Bill Impact: The passage of the 21st Century Road to Housing Act by Congress has led to gains for homebuilders and building suppliers, with KB Home and Builders Firstsource rising over 16% and 11% respectively, highlighting the positive impact of policy support on the industry.
- Crude Oil Price Drop: WTI crude oil prices fell more than 4% to a 3.5-month low, lowering inflation expectations and boosting stock markets, particularly benefiting airline and cruise line stocks due to reduced fuel costs, demonstrating the influence of energy market fluctuations on the broader economy.
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- Strong Online Travel Performance: Expedia Group and MakeMyTrip rose over 9%, while Booking Holdings increased around 8%, and Airbnb and TripAdvisor advanced about 4% and 3% respectively, indicating a robust rebound in consumer demand for leisure travel.
- Cruise Operators Rise: Royal Caribbean gained about 6%, Norwegian Cruise Line Holdings rose approximately 4%, and Carnival Corp increased around 3%, reflecting the cruise industry's recovery potential amid falling oil prices, further enhancing investor confidence.
- Other Travel Services Up: Travel+Leisure Co advanced about 3%, indicating a positive market response for the overall travel services sector under the dual benefits of declining oil prices and recovering demand.
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- Market Positioning Impact: A company's market cap determines its size tier among peers, directly affecting which mutual funds and ETFs are willing to hold the stock, particularly as large funds tend to favor companies with market caps exceeding $10 billion.
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See More
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- Market Education and Investor Relations: During the IPO process, Navan engaged in market education to highlight the synergy between its business model and AI, helping investors understand its unique value proposition, which is expected to boost the company's stock price and attract further investment.
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