On Thursday, Cantor Fitzgerald began coverage of Expedia Group Inc. (NASDAQ:EXPE) with a Neutral rating and a 12-month price target of $130.00. The firm provided insights into the company's varied brand performance, noting that while the core Expedia brand has been outperforming, Hotels.com continues to face challenges. However, there is a positive note on VRBO, as its growth rates have begun to stabilize towards the end of the second quarter of 2024.
The analyst from Cantor Fitzgerald expressed a cautious outlook for Expedia's growth, anticipating it to be non-linear with potential volatility in demand. This perspective is influenced by the year-to-date underperformance of Expedia's stock, which the analyst attributes to brand-level issues encountered in the first half of 2024. Current expectations do not foresee a scenario for upward earnings revisions or a valuation multiple expansion in the near term for Expedia.
The price target set for Expedia at $130 is based on a multiple of 16 times the forecasted GAAP earnings per share for the fiscal year 2025, with adjustments made for net debt, including merchant payables. This valuation reflects the firm's neutral stance on the stock, balancing the positive aspects of certain brands with the broader challenges that the company faces.
Cantor Fitzgerald's initiation of coverage on Expedia comes at a time when the travel industry is experiencing mixed trends, with varying performances across different brands and segments. The firm's neutral rating indicates a wait-and-see approach, acknowledging the potential for stabilization in some areas of the business while also recognizing the difficulties that may limit the stock's short-term growth prospects.
In other recent news, Expedia Group has been maintaining a positive trajectory, particularly in its business-to-business (B2B) segment. B.Riley, in a recent note, sustained its Buy rating for the company, expressing optimism in Expedia's B2B offerings. The firm anticipates robust growth and profitability in this segment due to expected increases in partner spend, new customer acquisitions, and improved margins from scaling operations.
Expedia's B2B segment has shown significant growth, marking $25 billion in bookings and over $100 million in room nights in 2023. CEO Ariane Gorin emphasized this growth strategy during a recent earnings call, revealing the company's ambition to capture a larger share of the $1.2 trillion addressable market through its robust hotel supply, distribution products, and technology.
Despite fluctuations in the business-to-consumer (B2C) segment, strong growth has been observed in Brand Expedia, and innovative strategies are being leveraged to grow Vrbo. The company's One Key loyalty program, which aims to tie together Expedia, Hotels.com, and Vrbo in the US, has been paused internationally for reevaluation. These are among the recent developments at Expedia Group, which continues to focus on growing both its B2B and B2C segments.
InvestingPro Insights
As Expedia Group Inc. navigates a complex market landscape, real-time data and insights from InvestingPro provide a deeper understanding of the company's financial health and stock performance. With a market capitalization of $17.83 billion, Expedia is a significant player in the travel industry. The company's P/E ratio stands at 23.16, reflecting market expectations of its earnings potential. Notably, Expedia's gross profit margins have been impressive, reported at 88.9% for the last twelve months as of Q2 2024, highlighting efficient operations and strong pricing power.
InvestingPro Tips for Expedia suggest a mixed picture: on the one hand, the company's management has been actively engaged in share buybacks, and it boasts a high shareholder yield, indicating confidence in the company's future and a commitment to returning value to shareholders. On the other hand, 16 analysts have revised their earnings downwards for the upcoming period, suggesting that there may be challenges ahead that could impact profitability.
For investors seeking a more comprehensive analysis, there are additional InvestingPro Tips available, including insights into Expedia's debt levels, price/book multiple, and stock price volatility. These tips provide valuable context for Cantor Fitzgerald's neutral rating and the cautious outlook expressed by analysts. With 13 more tips available on InvestingPro, investors can access a wealth of information to inform their investment decisions.
Recent stock price movements have shown volatility, with a strong return over the last month at 20.34%, yet year-to-date performance indicates a decline of 11.11%. The company does not pay a dividend, which may influence investment strategies focused on income generation. As Expedia continues to evolve its B2B and B2C strategies, these financial metrics and expert insights from InvestingPro will be crucial for stakeholders to monitor.
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