Expedia Group, Inc. (EXPE - Get Rating) is an international online travel company operating through B2C, B2B, and trivago segments. Its three pillars, Expedia Brands, Expedia Product & Technology, and Expedia for Business, cater to the varied needs of consumers across the travel ecosystem.
The company reported solid financial results for the third quarter of 2024. Its booked room nights increased by 9% compared to 2023, and its total gross bookings of $27.50 billion reflect 7% growth from 2023 and an over 150 basis point acceleration from the second quarter.
EXPE’s operations are continuously expanding with strategic collaborations and partnerships with leading companies like Microsoft Corporation (MSFT - Get Rating). During fiscal 2024, it also entered into a multi-year agreement with Wells Fargo (WFC - Get Rating) and Mastercard (MA - Get Rating) for the launch of two new co-branded credit cards, the One Key™ Card and One Key+™ Card.
Further, with the swiftly evolving traveling industry, the prospects of EXPE’s growth are robust. In 2025, total U.S. travel spending is projected to grow 3.9% to a total of $1.35 trillion. Current travel trends are driven by resilient consumer spending, sustained business investment, and major events promoting international visits.
The travel and tourism market is projected to grow to $1.02 trillion by 2032, exhibiting growth at a CAGR of 5.8%, driven by increasing internet penetration, digital innovations, and government investment in the industry.
Shares of EXPE have gained 38.2% over the past six months to close its last trading session at $187.28. Also, the stock has soared by 27.1% over the past year.
Let’s look at factors that could influence EXPE’s performance in the upcoming months.
Positive Recent Developments
On October 29, 2024, EXPE and Microsoft Corporation announced a strategic partnership, combining companies’ respective loyalty programs and offering Bing users additional rewards on bookings powered by EXPE. This marked the first time EXPE combined its industry-leading Rapid API technology and One Key travel rewards program.
Through Rapid API, Microsoft Bing users benefit from Expedia Group’s seamless end-to-end booking experience and get access to wide choices.
Robust Financials
For the third quarter that ended September 30, 2024, EXPE’s revenue increased 3.3% year-over-year to $4.06 billion. Its operating income rose 25.5% from the year-ago value to $762 million. The company’s adjusted EBITDA of $1.25 billion indicates growth of 2.8% from the prior year’s quarter.
In addition, adjusted net income attributable to Expedia Group, Inc. came in at $809 million, up 4% year-over-year. Also, the company’s adjusted EPS was $6.13 for the quarter, reflecting an increase of 13.3% year-over-year.
Further, as of September 30, 2024, EXPE’s total assets stood at $23.40 billion compared to $21.64 billion as of December 31, 2023.
Favorable Analyst Estimates
Analysts expect EXPE’s revenue for the fourth quarter (ended December 2024) to come in at $3.07 billion, indicating an increase of 6.4% year-over-year. The consensus EPS estimate of $2.09 for the same period reflects a 21.8% year-over-year improvement. Further, the company has an impressive earnings surprise history, having topped consensus EPS estimates in all four trailing quarters.
For the fiscal year 2024, the company’s revenue and EPS are anticipated to grow 5.8% and 22.8% year-over-year to $13.58 billion and $11.89, respectively. In addition, Street expects its revenue and EPS for the fiscal year 2025 to grow 7.9% and 18.8% from the prior year to $14.66 billion and $14.13, respectively.
High Profitability
EXPE’s trailing-12-month gross profit and EBIT margins of 89.19% and 11.41% are 137.9% and 39.9% higher than the 37.49% and 8.15% industry averages. Its trailing-12-month levered FCF margin of 12.44% is significantly higher than the industry average of 4.45%. Likewise, the stock’s trailing-12-month net income margin of 7.97% is 81.7% higher than the industry average of 4.38%.
Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 71.25%, 10.28%, and 4.56% are higher than the 10.95%, 6.22%, and 3.95% industry averages, respectively.
Lower Valuation
In terms of forward non-GAAP P/E, EXPE is currently trading at 15.75x, 8.4% lower than the industry average of 17.19x. Similarly, the stock’s forward EV/EBITDA and Price/Cash Flow of 9.16x and 8.16x are considerably lower than the industry averages of 10.53x and 11.30x, respectively.
POWR Ratings Reflect Promise
EXPE’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. EXPE has an A grade for Quality, which is in consistent with its higher-than-industry-profitability. Also, the stock has a B grade for Valuation, in sync with its lower valuation.
EXPE is ranked #3 among the 48 stocks in the A-rated Internet industry.
Beyond what I have stated above, we have also given EXPE grades for Momentum, Sentiment, Stability, and Growth. Get access to all the EXPE ratings here.
Bottom Line
EXPE is an innovative online travel company providing all travel-related services to customers. EXPE’s wide variety of products and services through its full-service online travel brands allow it to serve diverse consumers. Further, the company’s long-term prospects are bright, driven by strategic expansion and solid financial performance, delivering continuous booking and revenue growth.
Given EXPE’s sound financials, higher profitability, and lower valuation, we think it would be wise to invest in this stock now.
How Does Expedia Group, Inc. (EXPE) Stack Up Against Its Peers?
While EXPE has an overall POWR Rating of A, investors could also check out these other stocks within the A-rated Internet industry with A (Strong Buy) or B (Buy) ratings: Yelp Inc. (YELP - Get Rating), Meituan ADR (MPNGY - Get Rating), and LEGALZOOM.COM, INC. (LZ - Get Rating).
For exploring other A and B-rated internet stocks, click here.
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EXPE shares were trading at $187.28 per share on Monday afternoon, down $1.39 (-0.74%). Year-to-date, EXPE has gained 0.51%, versus a 1.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More...
