Analysts’ bullish recommendation
Expedia (EXPE) could be an intriguing investment choice, according to Wall Street analysts’ latest ratings. Analysts covering the stock are expecting a strong double-digit upside in its price. Of the 33 analysts covering EXPE, 23 have recommended a “strong buy” or “buy,” and the remaining ten have recommended a “hold.” Given Wall Street’s one-year forward price target of $147.48, the stock has an upside potential of 30.4% from its current market price of $113.09.
What’s driving this optimism?
Expedia’s back-to-back quarters of strong bottom-line results have instilled confidence in the stock. The company’s EPS have topped Wall Street’s estimates in the last three quarters and have also marked significant YoY improvement. Expedia reported its third-quarter results on October 25. It reported adjusted EPS of $3.65, surpassing the estimate of $3.12 and marking a significant YoY rise of ~45%. Its revenue of $3.28 billion rose 10.5%, but fell short of analysts’ forecast of $3.30 billion.
An improving US economy as reflected in the country’s growing GDP, healthy job market, and steady rise in wages is driving travel demand in the domestic market, which should support Expedia’s top and bottom line results. Moreover, the company’s sustained focus on marketing initiatives and the enhancement of its product portfolio, along with its mobile-centric product design, should further boost its user base.
With its enriched global footprint, Expedia is also well positioned to benefit from growing demand for online travel booking platforms. As per Technavio’s latest report, global online booking is expected to increase at a compound annual growth rate of 11% from 2018 to 2022.
Expedia’s 2018 stock performance
Expedia stock was highly volatile in 2018. The stock gained momentum every time it reported its quarterly results last year but always lost momentum within a few days due to multiple macroeconomic factors including trade war and global growth slowdown worries.
In 2018, Expedia fell 5.9%, significantly underperforming the returns of arch-rival TripAdvisor (TRIP), which gained 56.5%. Its other competitors, Booking Holdings (BKNG) and Ctrip.com International (CTRP), lost 0.9% and 38.6% of their respective values last year.
The First Trust Dow Jones Internet Index Fund (FDN) has a ~2.5% exposure to Expedia stock.