Why Expedia Stock Rose 4% despite Weak Q1 Results

Expedia Group (NASDAQ:EXPE) stock gained around 4% in after-hours trading on Wednesday following its first-quarter results. The online travel booking company posted lower-than-expected earnings in the first quarter of 2020. The travel industry witnessed financial devastation from the coronavirus pandemic. However, the stock rose after the company said that it observed a slight recovery in May.

In the first-quarter earnings release, Expedia CEO Peter Kern said, “Like all travel companies, Expedia Group suffered a major reduction in business since the onset of COVID-19. Fortunately, we were ahead of the game having implemented cost savings measures earlier this year, and with the added pressure from COVID-19 we accelerated and expanded our ambition on improving our long-term cost structure.” He also said, “We also raised significant additional capital, to further strengthen our liquidity position as we navigate this disruption and position the business for recovery.” Kern thinks that the company will emerge stronger after COVID-19.

Expedia’s Q1 earnings results

In the first quarter, Expedia reported an adjusted EPS of -$1.83 compared to -$0.27 in the first quarter of 2019. The earnings missed analysts’ consensus estimate of -$1.23 per share. Expedia generated revenue of $2.21 billion—a reduction of 15.3% from the first quarter of 2019. The travel company beat analysts’ consensus revenue expectation of $2.20 billion.

Lodging accounted for 69% of Expedia’s revenues in the first quarter, while revenues from air travel, advertising and media, and other sources contributed 5%, 9%, and 17%, respectively.

The revenues from the lodging business decreased by 10% YoY (year-over-year) due to a 14% fall in room nights stayed. The decrease was partially offset by a 5% rise in the revenues per room night. Expedia’s air travel business witnessed a revenue decline of 56% YoY due to a 41% decline in the revenues per ticket and a 26% reduction in air tickets sold. The company’s advertising and media revenues fell 23% YoY in the first quarter, while other revenues declined 7% YoY.

In the first quarter, Expedia’s revenue from the US fell 11% YoY to $1.32 billion, while its International revenue fell 21% YoY to $0.89 billion.

Analysts’ recommendations

Among the 30 analysts following Expedia stock, 13 recommend a “buy,” 16 recommend a “hold,” and one recommends a “sell.” Wall Street analysts’ mean target price on the stock is $97.81, which implies a 22.9% gain from the current level of $79.58. The consensus target price for the stock has fallen from $100.30 in April—a fall of 2.5%.

Many analysts revised their target price for Expedia stock after its first-quarter earnings report on Wednesday.

  • RBC increased its target price from $71 to $90.
  • J.P. Morgan increased its target price from $80 to $84.
  • Credit Suisse increased its target price from $90 to $101.
  • Evercore ISI downgraded the stock from “outperform” to “in line” and decreased its target price from $130 to $85.
  • Deutsche Bank increased its target price from $87 to $112.
  • Mizuho increased its target price from $73 to $80.
  • Stifel increased its target price from $75 to $85.
  • Cowen and Company increased its target price from $92 to $100.
  • Barclays increased its target price from $90 to $100.
  • Benchmark decreased its target price from $155 to $103.

Peer comparison

TripAdvisor (NASDAQ:TRIP) reported sales of $278 million in the first quarter, which ended in March—a fall of 26.1% YoY. The company’s adjusted EPS fell 80.6% YoY to $0.07. In the first quarter of 2019, TripAdvisor reported sales of $376 million and an adjusted EPS of $0.36. Analysts expected TripAdvisor to post revenues of $300.6 million and an adjusted EPS of $0.18 in the first quarter.

Booking Holdings (NASDAQ:BKNG) reported sales of $2.3 billion in the first quarter, which ended in March—a decline of 19.4% YoY. The company’s adjusted EPS fell 66.2% YoY to $3.77. In the first quarter of 2019, Booking Holdings reported sales of $2.8 billion and an adjusted EPS of $11.17. Analysts expected the company to post revenues of $2.23 billion and an adjusted EPS of $5.64 in the first quarter.

Expedia’s stock returns

Expedia stock rose 4.2% on Wednesday and ended the day at $79.58. At this closing price, the company’s market cap is $11.2 billion. Notably, the stock is trading 44.7% below its 52-week high of $144.00 and 95.2% above its 52-week low of $40.76.

Based on the closing price on Wednesday, Expedia stock was trading 15.7% above its 20-day moving average of $68.81. The stock is also trading 27.8% above its 50-day moving average of $62.29 and 6.6% below its 100-day moving average of $85.16. Expedia’s 14-day relative strength index number is 63.15. The number indicates that the stock is approaching overbought levels.

On Wednesday, Booking Holdings and TripAdvisor stocks returned 3.3% and 5.7%, respectively. On the same day, the Dow Jones Industrial Average rose by 369 points or 1.52%. Also, the S&P 500 and the Nasdaq Composite rose by 1.67% and 2.1%, respectively. Read BofA Survey: Fund Managers Expect Stock Market Crash to learn more.