On Friday, Expedia Group Inc. (NASDAQ:EXPE) saw a shift in its stock rating, as it was downgraded from 'Outperform' to 'Market Perform' by BMO Capital. Accompanying this downgrade, the stock's price target was also reduced to $145 from the previous $165.
The change in rating was attributed to slower than anticipated adoption rates for Expedia's vacation rental platform, Vrbo. Despite completing a significant tech migration in the fourth quarter of 2023 and increasing marketing expenditures in the first quarter of 2024, Vrbo's growth has not met expectations.
Additionally, Hotels.com, another brand under Expedia's umbrella, experienced an unexpected growth halt. The stagnation is linked to two main factors: complications arising from technology migration and changes made to its loyalty program, transitioning towards what is known as One Key.
BMO Capital notes that Expedia plans to intensify its marketing efforts to bolster Vrbo throughout 2024. While this strategy could have positive outcomes, the firm indicates that current visibility into the potential success of these efforts is limited, prompting the more cautious rating stance.
InvestingPro Insights
With Expedia Group Inc. (NASDAQ:EXPE) experiencing a recent downgrade by BMO Capital, investors are closely examining the company's financial health and market position. According to InvestingPro data, Expedia boasts a robust gross profit margin of 87.75% for the last twelve months as of Q4 2023, indicating strong profitability in its operations. Additionally, the company has a market capitalization of $18.03 billion, reflecting its significant presence in the online travel industry.
InvestingPro Tips suggest that Expedia's management has been proactive in enhancing shareholder value through aggressive share buybacks and maintaining a high shareholder yield. Despite the concerns raised by BMO Capital, Expedia is also noted for its impressive gross profit margins and is trading at a low P/E ratio relative to near-term earnings growth, which stands at 15.96 as of Q4 2023. This could signal a potentially undervalued stock given its earnings prospects.
For investors seeking more in-depth analysis and additional insights, there are 12 more InvestingPro Tips available for Expedia on InvestingPro. Those interested in taking their investment research to the next level can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of data and expert analysis to inform their investment decisions.
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