Expedia Group Inc (NASDAQ:EXPE) stock fell 0.73% (As on November 28, 6:31:59 AM UTC-4, Source: Google Finance) after Baird said it was initiating coverage on online booking firms lke Expedia Inc and Booking Holdings Inc, giving them both an “outperform” rating, citing positive travel demand environment. The brokerage set a $225 price target for Expedia, forecasting a potential total return of over 22%. It highlighted the company’s significant business transformation, driven by a unified brand strategy and an integrated back-end technology platform. While these changes have been disruptive, they position Expedia for a meaningful turnaround.
Expedia had undertaken a restructuring effort that enables customers to book across brands through a single platform. Its portfolio includes the vacation rental service Vrbo and Hotels.com. Brokerage noted execution challenges and heightened competition in the online travel space but noted that these risks appear to be priced in into the stock’s current valuation, which remains discounted.
Moreover, Baird’s favorable view on Expedia stemmed from the company’s in-process business transformation, which included brand strategy and technology integration. “We view EXPE shares as a ‘turnaround’ story with low analyst/investor expectations and attractive valuation. FCF generation is robust, a majority of which is being used for share repurchases, and any improvement in growth and/or margins could result in a meaningful re-rating, in our opinion,” the analysts added. Here too Baird’s estimates remained slightly above consensus. For 4Q24, the financial services firm modeled EPS of $2.08 (+3% vs. consensus) and adjusted EBITDA of $572 million (just above consensus). For 2025, EPS of $14.45 (+3% vs. consensus) and adjusted EBITDA of $3.2 billion (+1% vs. consensus) was expected.
Meanwhile, the company saw a 25% increase in package bookings in the third quarter, driven by new product features and targeted promotional activity. Vrbo returned to growth with improved app performance and expanded supply, adding nearly 1 million units previously only available on Brand Expedia. The advertising business delivered strong growth with revenue up 32%, driven by more advertisers and new product capabilities. B2B bookings grew 19% year on year, with new partnerships and solutions contributing to the growth. Total gross bookings of $27.5 billion grew 7% compared to 2023, a more than 150 basis point acceleration from the second quarter. B2C gross bookings increased 3% year-over-year, a 2-point acceleration from the second quarter. B2B had yet another strong quarter with gross bookings up 19% year-over-year. Lodging gross bookings of $20.0 billion grew 8% compared to 2023. Within that, hotel bookings were up 10% compared to 2023.