On Friday, Barclays (LON:BARC) adjusted its price target for Expedia Group Inc. (NASDAQ:EXPE), increasing it to $153 from the previous $134, while maintaining an Equalweight rating on the stock. The revision follows Expedia's third-quarter performance, which showed bookings and EBITDA surpassing estimates by approximately 3% and 2%, respectively. However, revenue was slightly below expectations, attributed to foreign exchange impacts, earlier pricing actions, and weaker first-half bookings at Vrbo, Expedia's vacation rental business.
Despite these revenue challenges, the company's revenue would have increased by 5% excluding foreign exchange effects, placing it at the higher end of the guidance range. Looking ahead, Expedia's fourth-quarter guidance is positive, and the full-year outlook has been improved to include a 1 percentage point increase in gross bookings and a modest margin enhancement, previously expected to be flat.
Barclays' commentary highlights the encouraging signs of top-line growth, especially with Vrbo, and notes the improved cost discipline within the company. This is significant considering the impact of adverse weather conditions in the Southeast during September and October, which appeared to affect Expedia more than its competitors.
However, the firm also expresses a desire for clarity on Expedia's long-term strategies, particularly regarding Vrbo's market share competition, the sustainable growth of Hotels.com, and plans to gain market share outside the United States. The expectation is that more details on these strategies may emerge in the coming quarters, amidst a period of executive turnover at Expedia, including the CFO's departure and recent appointments of a new CTO and general managers for Vrbo and Hotels.com.
Barclays concludes that with Expedia's stock trading at just over 10 times the consensus GAAP EPS forecast for FY26 prior to the earnings report, the valuation appears fair. The new price target of $153 reflects an updated valuation framework extending into FY26.
In other recent news, Expedia Group Inc. reported third-quarter earnings that surpassed analyst expectations. The company's adjusted earnings per share for the quarter ending September 30, 2024, came in at $6.13, exceeding the estimated $6.05. However, Expedia's revenue was slightly below expectations, with a total of $4.06 billion against the projected $4.11 billion. Despite this, the company's gross bookings showed a robust 7% year-over-year increase to $27.5 billion.
Goldman Sachs recently adjusted its price target for Expedia, raising it to $208 from $200, while maintaining a Buy rating. The firm cited Expedia's third-quarter earnings and highlighted the company's performance that surpassed Gross Bookings expectations and achieved slightly better than anticipated adjusted EBITDA. Furthermore, Expedia's management noted a second consecutive quarter of accelerated Gross Bookings in the B2C segment, with Brand Expedia and Vrbo showing growth.
In other developments, Expedia's CFO, Julie Whalen, is set to step down, with the search for a successor currently underway. The company's B2B sector was highlighted as a consistent area of growth. These are among the recent developments that have led to Expedia raising its full-year guidance, indicating confidence in its future performance.
InvestingPro Insights
Expedia Group Inc. (NASDAQ:EXPE) has been showing strong market performance, aligning with Barclays' positive adjustment to its price target. According to InvestingPro data, the company's stock has seen impressive returns, with a 47.61% price total return over the last three months and a 56.11% return over the last six months. This upward trajectory is further supported by the stock trading near its 52-week high, with a price that is 99.83% of its highest point in the past year.
InvestingPro Tips highlight that Expedia operates with impressive gross profit margins, which is reflected in the data showing a gross profit margin of 89.19% for the last twelve months as of Q3 2024. This strong profitability metric underscores the company's ability to maintain efficient operations, even as it navigates challenges in revenue growth and market competition.
However, investors should note that Expedia is trading at a high Price / Book multiple of 17.15, which may indicate that the stock is relatively expensive compared to its book value. This valuation consideration aligns with Barclays' assessment that the current stock price reflects a fair valuation.
For readers interested in a deeper analysis, InvestingPro offers 13 additional tips for Expedia, providing a more comprehensive view of the company's financial health and market position.
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