Expedia share to spot weaknesses?

[Updated: 09/10/2021] Expedia

Inventory update

Expedia share (NASDAQ

: EXPE) has increased by 48%, increased from about $ 100 to $ 147 in the last twelve months. However, the company’s revenue has declined 36% to a consolidated value of $ 5.8 billion in the past four quarters, from a consolidated figure of $ 9 billion in the previous four quarters. This discrepancy between sales and stock price seems to be one reason to be cautious about the stock – as EXPE stock continues to be highly valued at a price-to-sales ratio of 3.8x (assuming Expedia’s P / S was in Period 2018-2019 at around 1.5x). Period). This is based on the travel company’s disappointing Q2 results and warning of a bumpy recovery from the pandemic. Our dashboard, Buy or fear Expedia stock? provides the key numbers behind our thinking, and we explain more below.

Expedia’s revenue for the second quarter was $ 2.11 billion, up from prior year revenue of $ 1.25 billion in the first quarter of 2021. However, it was still 24% below the $ 2.78 billion mark that it had reached in the previous quarter before Covid. As a percentage of total global revenue in the second quarter of 2021, 73% was accommodation, 8% advertising and media, only 4% air travel and the remainder other services. Expedia Group benefited from strong performance in vacation rentals and improved conventional accommodations, offset by continued weakness in international travel, business travel and relatively high consumer interest in smaller markets and lower-priced accommodations. As the third quarter begins, the latest variants of Covid around the world could likely continue to cause uncertainty in the travel industry. While the US has made an aggressive attempt to vaccinate its population, with 53% already fully vaccinated, the number is quite low on a global scale at 28%. Mass vaccination definitely helps the travel industry recover, but full recovery remains in question until most of the world is fully vaccinated.

Expedia’s stock grew 18% from around $ 113 at the end of fiscal 2018 to around $ 132 at the end of fiscal 2020. While the company’s revenue per share fell by a whopping 50% during that period – thanks to the pandemic restrictions, the company’s share price rose Company at the end of fiscal 2020 on the optimism of the vaccine trial news. It should also be noted that Expedia’s P / S was roughly 1.5x over the 2018-2019 period. It appeared to be higher in 2020 as the reported decrease in RPS caused the P / S ratio to appear higher at that point. The company’s P / S ratio increased from about 1.5x at the end of FY 2018 to 3.7x at the end of FY 2020. While the company’s P / S is now around 3.8x, we expect that number to be somewhat will sink closer to historical values.

[Updated: 08/04/2021] Expedia Q2 pre-earnings

Expedia (NASDAQ: EXPE), a travel company offering everything from airline tickets, hotel rooms, car rentals to cruises, is expected to announce its second quarter results on Thursday, August 5th. We expect Expedia stock is likely to trade higher, with sales and earnings exceeding consensus estimates. Expedia saw a slower decline (compared to a sharp decline last year) in retail, driven by improvements in leisure travel trends in the first quarter, particularly in North America. Additionally, the company saw revenue per room night increase 10% in the first quarter as it benefited from an increase in the percentage of nights in alternative accommodations (Vrbo) that have higher revenue per room night. Although Expedia doesn’t release Vrbo numbers, the company’s management reported that it benefited from its vacation rental business and domestic operations in the United States in the first quarter. However, restrictions related to Covid-19 in the US were relatively relaxed in the second quarter, accounting for 67% of total Expedia revenue – suggesting an improving trend in the future. While Expedia still has a long way to go in growing its operating metrics similar to 2019 levels, mass vaccination is definitely helping the travel industry bounce back. In addition, Expedia announced its intention to sell its Egencia division in order to better focus on its core technology and B2B business. This sell-off is part of Expedia’s move to further streamline operations.

Our forecast shows that Expedia is valued at $ 184 per share, which is 19% above the current market price of around $ 155. Check out our interactive dashboard analysis Expedia pre-earnings: What can we expect in the second quarter? for more details.

(1) Revenues are expected to exceed consensus estimates

Trefis estimates Expedia’s revenue at around $ 2.1 billion in the second quarter of 2021, 5% higher than the consensus estimate. Expedia Group’s total revenue declined 44% year over year (yoy) to $ 1.2 billion in the first quarter of 2021, but rose nearly 36% from the previous quarter from $ 920 million in the fourth quarter of 2020 Sales in the segment decreased by 62%. As a percentage of total global revenue in the first quarter of 2021, 72% was accommodation, 7% advertising and media, only 4% air travel and the remainder other services. Adjusted EBITDA for the first quarter of 2021 was $ 58 million, down 24% from the first quarter of 2020.

We expect for the full year 2021 Expedia sales growing 58% year over year to $ 8.2 billion.

(2) Earnings per share likely to exceed consensus estimates

Expedia’s earnings per share for the second quarter of 2021 is expected to show a loss of $ -0.50, according to Trefis analysis, which is slightly better than the consensus estimate of $ -0.65. The travel company reported a profit of $ 4.17 for the first quarter compared to a loss of $ 9.24 for the same period last year. Long-term, Expedia will have to manage its negative free cash flow of $ 4.6 billion in 2020, up from $ 1.6 billion in positive free cash flow the previous year. So it has to generate at least $ 6 billion to get back to normal, of which it was $ 2 billion in the first quarter. While Expedia still has $ 4.3 billion in unconstrained cash and short-term investments, and $ 2 billion in idle turret capacity, the deleveraging of its heavy debt of $ 8.5 billion will be strong as the company’s recovery continues depend on the pandemic.

(3) Share price estimate higher than current market price

According to our Expedia rating, with estimated revenue per share of about $ 58.40 and a P / S multiple of about 3.2x in FY2020, that equates to a price of $ 184, which is 19% above the current market price of about 155 lies.

It is helpful to see how the peers are composed. EXPE Peer Share Comparison for comparing Expedia to peers on key metrics.

See everything Trefis Featured Analyzes and Download Trefis data here2

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