Is Expedia Group a Buy Under $200?
Online travel agency Expedia Group (EXPE) took a hit during the pandemic due to a near-complete halt in travel. However, the company staged a solid comeback in its last reported...
Online travel agency Expedia Group (EXPE) took a hit during the pandemic due to a near-complete halt in travel. However, the company staged a solid comeback in its last reported quarter, driven by the continuing recovery in travel. But the stock is down 13.1% in price year-to-date, closing the last trading session at $157.01. So, is it worth investing in the stock now? Continue reading to learn our view.
Online travel company Expedia Group, Inc. (EXPE) operates through its Retail; B2B; and Trivago segments. Its brand portfolio includes Brand Expedia, Hotels.com., Vrbo, Orbitz, CheapTickets, and Travelocity, and it operates in more than 70 countries worldwide. EXPE is headquartered in Bellevue, Wash.
The company has had a rough ride during the pandemic due to the global public health driven lockdown. However, EXPE marked a comeback in its fourth quarter of 2021, benefiting from a robust holiday travel season despite the omicron variant wave which took a toll globally. With a strong foothold in the international market, EXPE is expected to continue benefiting this year as the travel industry gains momentum with the easing of restrictions and solid progress in the global vaccination drive. Furthermore, given the flexibility that people are enjoying courtesy of the hybrid work culture, and people's broadened capacity to explore travel to and work from other locations, demand for EXPE's services should be boosted. "The travel industry and traveling public prove more resilient with each passing wave, and we continue to expect a solid overall recovery in 2022, barring a change in the trajectory of the virus," Expedia Chief Executive Peter Kern said.
The online travel agency's shares advanced after the company beat earnings estimates in its last reported quarter and several equity analysts raised their price targets. The stock hit its 52-week high of $217.72 on February 16. EXPE has gained 6.5% in price over the past six months to close yesterday's trading session at $157.01. It is down 13.1% year-to-date.
Here is what could shape EXPE's performance in the near term:
Solid Growth in its Last Reported Quarter
For its fiscal fourth quarter, ended Dec. 31, 2021, EXPE's total revenue increased 148% year-over-year to $2.28 billion, driven by solid growth in lodging demand, airline bookings, and advertising at Trivago and Expedia Group Media Solutions. Its gross bookings were up 131% from their year-ago value to $17.46 billion. Its adjusted net income came in at $167 million, versus a $376 million loss in the same period last year, while its adjusted EPS came in at $1.06, indicating a substantial increase from negative $2.64 in its prior-year quarter. The company's earnings topped the consensus estimate by 53.6%. And EXPE company reported record-high fourth quarter adjusted EBITDA of $479 million.
Analysts expect 81.7% year-over-year growth in the company's revenues in the current quarter, 49.4% in the following quarter, and 37.6% in the current year. Also, its EPS is expected to increase 72.8% in the current quarter, 242.5% in the next quarter, and 365.5% in the current year. And its EPS is expected to grow 22.8% per annum over the next five years.
In addition, several analysts have lifted their price targets for the stock. RBC raised its target price to $200 from $180. Evercore ISI lifted its target price to $238 from $176. Piper Sandler upped its target price to $231 from $216. BTIG increased its target price to $235 from $200. And Wall Street analysts' 12-month median price target of $218.65 indicates a potential 39.3% upside from its last closing price, with a high forecast of $265.00 and a low forecast of $155.00.
POWR Ratings Show Promise
EXPE has an overall B rating, which translates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Growth, which is consistent with its robust growth in its last reported quarter.
EXPE has a B grade for Quality. This is justified because its gross profit margin, and levered FCF margin are 129.2% and 417.6% higher than the industry averages, respectively.
Among the 74 stocks in the Internet industry, EXPE is ranked #4.
Beyond what I have stated above, one can also view EXPE's grades for Value, Sentiment, Momentum, and Stability here.
View the top-rated stocks in the Internet industry here.
Note that EXPE is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
The company has delivered robust growth in the fourth quarter, with normalization of travel trends that drove gross bookings higher, improving its revenues. Also, analysts are bullish on the company's near-term growth prospects. Furthermore, with travel interest picking up after months of lockdown and quarantining, EXPE should be able to improve its business further this year. Thus, I think EXPE could be worth betting on now.
How Does Expedia Group, Inc. (EXPE) Stack Up Against its Peers?
EXPE has an overall POWR Rating of B. However, one could also check out these other stocks within the Internet industry, trivago N.V. (TRVG) with an A (Strong Buy) rating, and Yelp Inc. (YELP) and Travelzoo (TZOO) with B (Buy) rating.
EXPE shares rose $1.69 (+1.08%) in premarket trading Tuesday. Year-to-date, EXPE has declined -13.12%, versus a -11.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree's keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master's degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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