Expedia Group: Recovering with the Travel Industry

Expedia Group NASDAQ: EXPE was one of the hardest-hit companies due to the coronavirus pandemic and has only very recently seen a respite in its gross bookings and revenues. In February 2021 the company’s revenues dropped 57% due to international travel restrictions and lockdowns. The stock has done well to reverse its course back towards positive earnings and has made significant gains in its top and bottom lines. Expedia is currently down 29.44% YTD and trades 38% below the MarketBeat consensus price target. As travel restrictions continue to ease throughout FY 2022 Expedia looks set to make a strong rebound to a new 52-week high.

Expedia’s Rebound in the Travel Industry

For the first quarter of 2022, Expedia reported significant improvements across all of its financial metrics compared to Q1 2021, with strong top-line growth and significantly reduced losses in net and operating income. Executives stated that Omicron affected bookings near the start of the quarter before fading and bouncing back to new highs since the start of Covid. Travel in Europe was also affected by Russia’s invasion of Ukraine, but this too increased to new recent highs. For the rest of the year, the company expects to see an uptick in summer leisure travel, as well as city, business, and international travel coming back stronger. 

Expedia reported growth in its gross bookings and revenues. Gross bookings increased 58% from $15B in Q1 2021 to $24B in Q1 2022. Revenues for the company jumped a huge amount from $1.2B to $2.2B, representing an 81% increase. Shareholders would also be pleased that its loss decreased 80% between the same time period from $606M down to $122M. 

When looking at the segments of the company one can see how far recovery has come for Expedia and as a proxy for the travel industry as a whole. Expedia recorded the biggest increase in revenue from its B2B travel segment with a 135% expansion to $432M. Its retail travel segment still experienced significant growth compared to the previous year as it grew by 70% to $1.7B. One explanation of why retail travel currently lags behind B2B is that many international travel destinations that were popular with tourists remain closed such as France and Japan. However, getting a business visa for these countries is possible for investors and managers of overseas companies. As countries relax their border restrictions retail travel is set to rebound strongly, with 81% of American travelers in 2022 reporting that they are excited about overseas travel.

Expedia’s Swelling Expenses

Despite seeing a significant improvement in the macro environment and financials, Expedia did suffer from significantly higher expenses compared to 2021. Some of the company’s largest cost increases came from selling and marketing expenses. These increased by 102% and 105% respectively. The reason for the increase in these direct costs was due to there being higher demand for travel than in 2021. Overall, Expedia’s GAAP cost of revenue increased by 19%. The company experienced higher processing fees and customer service costs. 

Technical Analysis

Expedia was significantly sold off during the pandemic. Now that the world is entering into a new phase of recovery and reopening the stock has the potential to significantly recover its lost ground. Unfortunately for Expedia bulls, there is now a different set of headwinds that are putting pressure on its stock price. These factors are affecting the company heavily, along with the fact that many popular tourist destinations have not yet opened their doors to tourists.

Over the short term for the stock, there have been two Doji candlesticks once the stock finished consolidating its losses. It should also be mentioned that these Dojis occurred within days of each other, signaling a significant level of indecision on behalf of the market. This indecision is evidenced by the low amount of volatility in the stock. It should be expected that the stock will continue consolidating before breaking out with higher volatility.