Expedia Stock Up 2x, Time To Sell?

Ukraine – March 22, 2021: The stock market information of Expedia Group is shown… [+] displayed on a smartphone with the Expedia Group logo in the backdrop in this photo illustration. (Photo courtesy of Getty Images/Igor Golovniov/SOPA Images/LightRocket)
Getty Images/SOPA Images/LightRocket
Expedia’s stock (NASDAQ: EXPE), a travel company that offers everything from airline tickets to hotel rooms to car rentals to cruises, has risen about twofold in the last year, from around $83 to $160. Expedia’s revenues, on the other hand, have dropped 64% in the last four quarters, to $4.2 billion from $11.7 billion in the prior four quarters. While this revenue and stock price mismatch appears to be a reason to sell the stock, we believe that the company’s current P/S multiple can still see further upward movement in the short to medium term, as EXPE stock remains highly valued at a price-to-sales ratio of 4.2x (given that Expedia’s P/S was around 1.5x during the 2018-2019 period). This is based on the travel company’s marginally improved Q1 results and brand-simplifying initiatives. The essential data underlying our approach are provided in our dashboard, What Factors Drove 42 Percent Change in Expedia’s Stock Between Fiscal 2018 and Now?, and we explain more below. In Q1, Expedia observed a slower fall in retail as leisure travel trends improved, particularly in North America. In addition, revenue per room night increased by 10% in Q1, thanks to an increase in the percentage of alternative accommodation (Vrbo) stayed room nights, which have a higher revenue per room night. Although Expedia does not break out Vrbo data, the company’s management stated that its vacation rental business and domestic business in the United States helped the company. Covid-19-related limitations have loosened in the United States, which represents for 67 percent of overall Expedia revenue, indicating a positive trend in the future. While Expedia still has a long way to go to achieve performance figures that are comparable to those of 2019, mass vaccinations are assisting the tourism sector in its recovery. Except in Asia, where vaccine distribution is very slow, the business has noted hopeful developments in countries where vaccine distribution is successfully structured (the UK, the US, and Israel). Expedia recently revealed its decision to sell Egencia, its corporate business arm, in order to focus on its core technology and B2B business. This sale is part of Expedia’s ongoing effort to streamline its operations.

Trefis in Stock Prices

Expedia’s shares increased by 18% from $113 at the end of fiscal year 2018 to $132 at the end of fiscal year 2020. Despite the fact that the company’s revenue per share fell by half during this time due to pandemic restrictions, the stock price rose toward the conclusion of fiscal 2020 on the back of positive vaccination trial news. It’s also worth noting that over the 2018-2019 period, Expedia’s P/S was at 1.5x. It appeared greater in 2020 because to a claimed decline in RPS, which caused the P/S ratio to appear larger. The P/S ratio of the company increased from 1.5x at the end of FY 2018 to 3.5x at the end of FY 2020. While the company’s P/S is now around 4x, we expect it to expand modestly in the future.
What Impact Does Coronavirus Have on Expedia’s Stock?
Expedia’s total revenue fell 44 percent year over year to $1.2 billion in the first quarter of 2021, with the company’s retail segment revenue decreasing 35 percent and its B2B segment revenue falling 62 percent. To break it down even more, housing accounted for 72% of total income, advertising and media accounted for 7%, air accounted for only 4%, and the rest came from various services. In terms of profitability, the company reported a loss of $4.17 in the first quarter, compared to a loss of $9.24 in the same period last year.
ADDITIONAL INFORMATION FOR YOU
Expedia must solve its $4.6 billion in negative free cash flow in 2020, compared to $1.6 billion in positive free cash flow the year before. To return to normalcy, it will need to generate at least $6 billion, compared to $2 billion in Q1. While Expedia still has $4.3 billion in unconstrained cash and short-term investments, as well as $2 billion in unused revolver capacity, the company’s $8.5 billion debt will be significantly reliant on its post-pandemic recovery.
It’s useful to check how your classmates compare. EXPE Stock Comparison With Peers to see how Expedia stacks up against its competitors on key criteria.
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