Today's Pick: ✈️ EXPE

As we gear up for the holidays, we look at a travel company that is recovering strongly from the pandemic-era decline.

July 18, 2023

💲 Business Model

Expedia Group, Inc. operates as an online travel company in the United States and internationally. The company offers a full-service online travel brand with localized websites, marketing and distributing lodging accommodations, an online marketplace for alternative accommodations, travel websites, an online EMEA travel agent, travel booking services, an online car rental booking service, a luxury travel specialist, and a provider of advice for travelers booking cruises. It also provides corporate travel management services, a hotel metasearch website, loyalty programs, hotel accommodations and alternative accommodations, and advertising and media services.

🚀 Growth Potential

  • Near completion of Expedia's tech stack to result in faster product innovation, improved shopping experience, and revitalized booking growth

  • Active loyalty member base for core OTA brands grew over 25% year-over-year

  • Percentage of gross bookings coming through app roughly doubled what it was in 2019

  • Migration of hotels.com to the brand Expedia stack completed

  • Hotels.com back in growth mode with higher conversion, increased feature velocity, and higher bookings

  • Migration path with VRBO started taking some traffic on the Expedia stack in largest markets

  • Unified loyalty program, One Key, to be released in July in the United States

  • Investment in technology to benefit B2C traveler experience and B2B partner experienceAdopting Commerce product to deepen customer relationships

⚖️ Intrinsic Value

GoDaddy (GDDY) is currently trading at $121.00.

Best Case:

  • 🟢 Intrinsic Value: $363.95 Undervalued by 67%

  • 🟢 DCF Value: $459.23 Undervalued by 74%

  • 🟢 Relative Value: $268.67 Undervalued by 55%

  • 🟢 Wall Street Analysts say EXPE is Undervalued by 7% compared to the average analyst price target

Worst Case:

  • 🟢 Intrinsic Value: $144.93 Undervalued by 17%

  • 🔴 DCF Value: $93.44 Overvalued by 23%

  • 🟢 Relative Value: $196.42 Undervalued by 38%

👉 DCF (Discounted Cash Flow) estimates the value of an investment based on projections of how much money that investment will generate in the future.

👉 Relative valuation involves the use of similar, comparable assets in valuing another asset.

☎️ Earnings Call Q1 2023 (May 4, 2023):

  • Revenue increased in Q1 2023 compared to the same period in the previous year.

  • Lodging gross bookings and free cash flow were the highest ever for the company.

  • Consumer demand was strong, with acceleration in international and big city travel.

  • Prices have held up well, with lodging ADRs remaining steady across geographies.

  • Air ticket prices have increased due to strong demand outstripping capacity.

  • Car rental prices have declined due to larger inventories allowing rental companies to drive more volume at the expense of price.

  • Expedia is investing in acquiring and retaining high value loyalty members and app users across its three leading brands.

  • The company is integrating Vrbo and unifying its rewards programs under "One Key" to maximize marketing spend and boost its following.

  • Potential for double-digit revenue growth in Q2 and Q3.

📰 Recent News

Sentiment: 🟢 Positive

Online travel and booking platform Expedia Group Inc. NASDAQ: EXPE is benefiting from the robust travel demand generating record revenues but still needs to catch up in profits and valuation. The travel and leisure industry was the epicenter during the pandemic but is seeing positive normalization across the board, from airlines to lodging to vacations.

Sentiment: 🟢 Positive

Expedia is a promising investment due to strong travel demand and its cheaper valuation compared to Booking.com. EXPE stock is working on integrating Vrbo and unifying its rewards programs under "One Key" to maximize marketing spend and boost its following. Despite uncertainties, Expedia's Q1 earnings show growth in revenue and room nights booked, with potential for double-digit revenue growth in Q2 and Q3.

Sentiment: 🟢 Positive

Expedia reported solid Q1 thanks to strong consumer travel demand. The near completion of Expedia's tech stack is expected to result in faster product innovation, improved shopping experience, and revitalized booking growth. EXPE is more profitable with an ongoing buyback to drive shareholders' returns. Our buy rating is confirmed.

Sentiment: 🟡 Neutral

Expedia, Hotels.com and Vrbo Unite as a Single Loyalty Program Driving Earn and Spend of OneKeyCash Across All Three Travel Apps Vrbo. New AI-powered Features Revolutionize How Travelers Plan and Shop a Trip. This program unifies the company's three flagship travel brands of Expedia®, Hotels.com® and Vrbo®, and marks the first time a major online vacation rental platform will have a loyalty program.

Mr. Market has another endearing characteristic: He doesn't mind being ignored. If his quotation is uninteresting to you today, he will be back with a new one tomorrow. Transactions are strictly at your option. Under the conditions, the more manic-depressive his behavior, the better for you.

Benjamin Graham, The Intelligent Investor

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