On Friday, TD Cowen adjusted its outlook on Expedia Group Inc (NASDAQ:EXPE), reducing the stock price target to $130 from the previous $165, while continuing to endorse the stock with a Buy rating. The adjustment follows the company's first-quarter performance, which saw gross booking volumes (GBV) meet expectations with a 3% increase.
Revenue and EBITDA exceeded forecasts due to robust advertising revenue and cost reductions. The analyst noted that while the business-to-business (B2B) segment is propelling growth, the business-to-consumer (B2C) side is experiencing a slowdown.
Expedia's second-quarter estimates are anticipated to pick up pace, yet they fall short of targets due to a decline in market share from its Vrbo brand and underperformance at Hotels.com. The company has also revised its full-year guidance, projecting a 4-9% increase in top-line revenue and steady margins. This comes despite significant layoffs and continued investment in B2C advertising and discounts, as well as revenue sharing in the B2B sector.
In light of these developments, TD Cowen has revised its estimates for Expedia's 2024 EBITDA downward by 5%, with a more significant cut to earnings per share (EPS) by 11% and free cash flow (FCF) by 18%. The new stock price target of $130 is based on 13 times the estimated 2024 free cash flow, adjusted for stock compensation, down from the prior target of $165.
The report reflects the challenges faced by Expedia in its B2C operations and the competitive pressures in the online travel market. Despite these hurdles, the maintained Buy rating suggests a continued positive outlook on the stock's potential performance.
InvestingPro Insights
Expedia Group Inc (NASDAQ:EXPE) is navigating a dynamic market landscape, and real-time data from InvestingPro provides additional context to the company's performance and outlook. With a market capitalization of $15.44 billion, Expedia is trading at a P/E ratio of 20.36, which adjusts to a more attractive 15.25 when considering the last twelve months as of Q1 2024. This is complemented by a PEG ratio of just 0.11, indicating potential for earnings growth relative to its current P/E ratio.
The company's gross profit margins are impressive, sitting at 88.39% for the same period, showcasing the efficiency of its operations. Despite concerns over B2C slowdowns, Expedia has demonstrated a strong return over the last year, with a 50.26% price total return, highlighting the stock's resilience and appeal to investors.
InvestingPro Tips spotlight the company's aggressive share buybacks and high shareholder yield, which are strategic moves that can enhance shareholder value. Moreover, Expedia's moderate level of debt allows for flexibility in future growth and investment strategies. For readers looking to delve deeper into Expedia's financials and future prospects, InvestingPro offers more tips, with PRONEWS24 providing an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Overall, while Expedia faces competitive pressures, the InvestingPro data and tips paint a picture of a company with solid fundamentals and strategic financial management, offering a potential opportunity for investors who are willing to look beyond short-term market fluctuations.
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