Expedia (NASDAQ: EXPE), the renowned travel company offering travel services from airlines, hotels, and car rentals to cruises, is about to unveil its financial performance for the fiscal fourth-quarter on February 8. While expectations indicate that the company’s stock may experience a slight dip due to revenues and earnings falling slightly below consensus estimates, Expedia’s stock has soared an astonishing 75% since 2023.

The tide of good fortune has undoubtedly favored Expedia, as travel demand remains robust despite prevailing macroeconomic challenges. Notably, the company’s business-to-business (B2B) segment has outshone its retail division in terms of growth, simultaneously bolstering profit margins. However, with Expedia’s stock currently trading at a price-to-earnings (P/E) ratio of 28x, a higher valuation compared to its peers and historical average, some investors are apprehensive about its future trajectory.

Despite the stock’s impressive trajectory, its journey has been erratic, characterized by fluctuations. The initial period marked a 36% increase in 2021, followed by a steep downturn of -52% in 2022, and a remarkable rebound of 73% in 2023. This roller-coaster ride, though emblematic of the stock market at large, has proven especially challenging for individual stocks recently, including industry giants like AMZN, TSLA, and TM, along with tech titans such as GOOG, MSFT, and AAPL. Strikingly, the Trefis High Quality (HQ) Portfolio, comprising 30 stocks, has consistently outperformed the S&P 500 each year over the same period – a feat that raises the question: Why?

With the prevailing uncertain economic climate, marked by soaring oil prices and elevated interest rates, investors are wary of a potential recurrence of Expedia’s underperformance in 2022. The burning question remains: Will Expedia stumble once again and trail behind the S&P 500 over the next 12 months, or is it poised for a robust upswing?

According to our forecast, Expedia’s valuation stands at $109 per share, representing a 29% disparity from the current market price. For a deeper insight into the expectations for Q4, it’s worthwhile to delve into our comprehensive analysis on Expedia Earnings Preview: What To Expect in Q4?.

(1) Revenues Expected to Fall Slightly Below Consensus Estimates

Expedia’s Q4 2023 revenues are anticipated to hover around $2.7 billion – marginally below the consensus estimate. In the third quarter, the company witnessed a 9% year-over-year (y-o-y) increase in revenue, amounting to $3.93 billion. The upswing was propelled by a 9% y-o-y surge in booked room nights, driving gross bookings to reach approximately $25.7 billion. Notably, lodging gross bookings spiked to $18.5 billion, marking an 8% growth compared to Q3 2022. The full-year 2023 revenue is projected to increase by 11% y-o-y, reaching $12.9 billion.

(2) EPS Likely to Marginally Miss Consensus Estimates

Trefis’ analysis suggests that Expedia’s Q4 2023 earnings per share (EPS) is anticipated to settle at $1.60, slightly below the consensus estimate. In the previous quarter, the company’s adjusted earnings per share skyrocketed by 34% y-o-y, reaching $5.41. Additionally, Expedia’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged by 13% y-o-y to $1.2 billion.

(3) Stock Price Estimate Lags Behind the Current Market Price

Based on Expedia’s valuation, the projected EPS of around $9.56 and a P/E multiple of approximately 11.4x in fiscal 2023 equate to a valuation of $109, representing a 29% deficit from the current market price.

To gain a better perspective, it’s beneficial to compare Expedia against its peers through the EXPE Peers analysis, which offers valuable insights into the company’s relative standing within the industry.

[1] Returns as of 2/7/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.