EXPE Stock Jumps on Earnings, Looks Ready for More Growth

Advertisement

Last summer, investors watched Expedia (EXPE) stock dive on serious growth concerns. But the company has since made up for the gap — and then some. After announcing its most recent earnings results, EXPE stock is up 12% to all-time highs in today’s trading.

EXPE-stock-pcln-stock-expedia-stockExpedia rival Priceline (PCLN) also saw a run, up around 4%. But can the momentum continue, or are there some potential headwinds for PCLN and EXPE stock?

First, let’s dig into the details of the fourth quarter for EXPE stock. Revenues jumped by 18% to $1.152 billion, and earnings hit 92 cents per share — up 46%. The Wall Street consensus forecast revenues of $1.138 billion and earnings of 86 cents per share.

Q4 bookings were also solid for EXPE stock. They shot up by about 21%, fueled by growth from properties like eLong (LONG) and Hotels.com. What’s more, room night growth was strong, up about 25% in the quarter. This compares to 20% in Q3.

EXPE stock also got help from the company’s efforts to improve distribution. For example, it looks like it’s getting traction from its strategic alliance with Travelocity, which appears to be ahead of schedule. Keep in mind that EXPE now manages a “vast majority” of the company’s U.S. traffic. There are also plans to expand this alliance into Canada and other countries.

It appears that Expedia’s purchase of Trivago has also been a winner. With the deal, the company now has a nice platform in Europe. And the growth has been off-the-charts. For the past 12 months, revenues spiked by more than 85%.

There were some issues during the quarter, however, as Hotwire continues to struggle. At the same time, the competitive environment remains intense — and it is far from clear if Expedia can be successful in markets like Asia. If anything, it could be expensive for the company to get a foothold.

There is also Google (GOOG), which has been revving up its efforts in the travel space. With its huge search platform and Android operating system, it could prove to be a big-time threat. So far, EXPE stock has been able to hold its own. The company also has been top-notch with executing on its operations.

EXPE Stock Outlook

Going forward, EXPE should be able to keep up the momentum. Again, the acceleration in the gross bookings is an encouraging sign — and points to strength in demand. It also is an indication that the company’s brands continue to resonate with customers. Given the intense competitive environment, this is critically important.

The company’s Travelocity deal is still in the early stages, and it seems likely that there will be additional fuel from this over the next couple quarters. There should also be a boost from Asia, which is a large market opportunity. Expedia has a nice position with its eLong asset, and a joint venture with Air Asia. The latter deal is fairly new and could provide a nice source of leads.

Europe is another bright spot. After several years of weak growth, it looks like economic activity is starting to improve, which should help with travel expenditures. Again, Trivago is already showing lots of momentum, which can only help EXPE stock.

Despite the company’s improvements, the valuation of EXPE stock is actually reasonable. The forward price-to-earnings ratio is 17 — a discount compared to PCLN stock, which is trading at about 22 times forward earnings.

But that doesn’t mean you should jump into EXPE stock today. After all, it’s a good bet that it is getting a boost from a “short squeeze” (about 11% of the float is held short). When short sellers rush to cover their positions, it creates lots of extra buying power.

So EXPE stock could easily fall back a bit. Yet when considering its powerful brand (which is critical in a highly competitive industry), relationships (Travelocity) and huge potential in global markets, it could be a good value for the next year or so.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Tom Taulli is the author of various books. They include Artificial Intelligence Basics and the Robotic Process Automation Handbook. His upcoming book is called Generative AI: How ChatGPT and other AI Tools Will Revolutionize Business.


Article printed from InvestorPlace Media, https://investorplace.com/2014/02/expe-stock-pcln-stock/.

©2024 InvestorPlace Media, LLC