Expedia stock forecast: buy or sell ahead of earnings?

The Expedia (EXPE) stock price nosedived on Friday, joining other Wall Street companies in their deep sell-off. It crashed to a low of $113.1, its lowest point since June 6th and by over 27% from its highest point this year, meaning that it has moved into a deep bear market. 

Revenge boom is fading

Expedia is one of the leading players in the travel and hospitality industries. It owns some well-known brands like Vrbo, Travelocity, Hotels.com, and Expedia Cruises. 

Its platforms help people to book their hotels, flights, and their vacation rentals. It operates in a highly competitive industry that is mostly dominated by Booking Holdings, the parent company of Priceline, Kayak, Booking.com, and OpenTable. 

As I wrote on my Airbnb stock forecast, there are concerns that the revenge travel boom is fading. Revenge travel is a situation where people who remained in pandemic lockdowns accumulated substantial savings and embarked on traveling after these lockdowns ended.

The industry has now returned to the new normal, which is characterized by slow but steady growth. This trend was evidenced by last week’s Booking Holdings numbers, which showed that its revenue rose by 7% in the last quarter to $5.9 billion. In his statement, the company’s CEO said that the business was seeing some moderation, especially in Europe. He said:

“From a regional perspective, we observed a mild moderation of travel market growth in Europe. However, we believe we’re continuing to perform well relative to the market in Europe.”

Expedia earnings ahead

Expedia, which was founded by Microsoft and spun off in 1999, has been one of the most important companies in the travel industry. Its revenue has been in a slow recovery after bottoming at $5.2 billion in 2020 because of the pandemic.

Data shows that its revenue rose to $8.59 billion in 2021 followed by $11.6 billion and $12.8 billion in 2022 and 2023, respectively. These numbers mean that it has now moved into its pre-pandemic levels since its revenue stood at over $12 billion in 2019.

Barring any major event in the industry, Expedia is expected to generate $13.7 billion and $14.7 billion in the next two financial years. 

The next important catalyst for the Expedia stock will be its earnings, which are set to come out on Thursday. 

In its most recent numbers, the company said that its total gross bookings rose by 3% to $30.2 billion in the first quarter. This growth happened as the lodging gross bookings rose to $21.9 billion while its hotel bookings rose by 12%. Revenue jumped to $2.9 billion while its operations loss stood at $110 million. 

Analysts expect the upcoming results to show that the company’s revenue rose by 5.2% in the second quarter while its earnings per share (EPS) improved from $2.89 to $3.06 in the last quarter. Expedia Group has a long history of beating analysts’ estimates, meaning that this trend could continue. 

Expedia has also continued to reward its shareholders. Its share repurchases in the first quarter stood at over $700 million, a move that has reduced its outstanding shares from over 150 million last year to 128 million today and the trend may continue in the coming months. 

Analysts believe that Expedia stock could bounce back in the coming months. Besides, the company’s revenue growth stands at over 8.1% while its forward EBITDA growth was at 10.7% and its forward diluted EPS growth was 73%. These are strong numbers for a company that has been in business for a long time. 

Expedia has a price-to-earnings ratio of 11.30 and a forward PE ratio of 9.85. These numbers mean that it is relatively undervalued compared to the S&P 500 index, which has a multiple of 20. 

Most analysts tracking the company have a buy rating, with the average stock target of $147, higher than the current $115. 24 of them have a buy rating compared to 7 who have a sell rating. 

Expedia stock price analysis

EXPE chart by TradingView

The daily chart shows that the EXPE share price has been in a strong bearish trend after peaking at $160.20 in March this year. It has crashed to its lowest point since June 6th and moved below the 50-day and 100-day Exponential Moving Averages (EMA).

The stock has dropped below the important support level at $124.75, its highest swing in February 2023. Also, the stock is hovering near the 23.6% Fibonacci Retracement point.

Therefore, the Expedia share price will likely continue falling as sellers target the key psychological point at $100. The alternative scenario is where it bounces back and retests the resistance level at $124.75. A break above that level will point to more upside in the coming months.