Expedia Group (EXPE) has been making waves in the travel and tourism industry, with its shares gaining an impressive 14.7% in the past month. This outpaces the Zacks Internet Commerce industry’s return of 7.3% and the Zacks Retail-Wholesale sector’s rally of 6.7% during the same period. EXPE’s success can be attributed to its strong position in the online travel booking space, boosted by its robust B2B, Brand Expedia, and advertising businesses, as well as its strength in lodging offerings. The company’s expansion across both US and international markets is driving its momentum.
Expedia’s strategic plan to integrate generative AI technology into its services, combined with its efforts to enhance its portfolio through expanding partnerships, is anticipated to further boost customer engagement in the near term. However, investors are left wondering if these efforts will be enough to sustain EXPE’s positive momentum. Let’s delve into the key factors driving Expedia’s near-term prospects.
Expanding Partnerships Fuel Growth Prospects
According to Statista, the global travel and tourism market is projected to reach $916 billion in 2024 and $1.11 trillion by 2029, representing a CAGR of 4% from 2024 to 2029. Expedia Group is well-positioned to capitalize on this growth trajectory, driven by its expanding network of partnerships. Recent collaborations include:
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Ryanair Partnership:
EXPE recently announced a partnership with Ryanair, Europe’s leading airline, offering travelers access to Ryanair’s budget-friendly flights. This partnership enhances choice and convenience for travelers seeking to optimize their travel experiences.*
Alaska Airlines Collaboration:
Expedia partnered with Alaska Airlines to introduce Stays by Alaska Vacation, a platform offering exclusive deals and the ability to earn and redeem miles through Alaska’s loyalty program. This partnership personalizes the travel experience for customers, covering everything from flights to accommodations.*
Co-Branded Credit Cards:
Expedia teamed up with Wells Fargo and Mastercard to launch two co-branded credit cards, One Key and One Key+. These cards offer U.S. travelers greater flexibility and rewards, including OneKeyCash, which can be used for travel bookings on Expedia, Hotels.com, and Vrbo. Cardholders earn OneKeyCash rewards and receive automatic upgrades to the One Key Silver and Gold tiers, providing 15% and 20% savings on over 10,000 hotels worldwide.*
Cathay Partnership:
EXPE joined forces with Cathay to embed its White Label Template technology into Cathay Holidays, enhancing and customizing the travel booking and planning experience for customers.*
Australian Tourism Partnerships:
Expedia partnered with Tourism and Events Queensland, Tourism Tropical North Queensland, Tourism Northern Territory, and Brisbane Economic Development Agency to enhance travelers’ experiences, promote sustainable tourism, and showcase Australia’s unique culture.*
Ikyu Collaboration:
EXPE partnered with Ikyu, a Japanese luxury hotel booking service, providing customers access to over 20,000 additional properties worldwide. Users can earn points for future bookings through EXPE’s Rapid API solutions.These partnerships are expected to drive top-line growth in the near term. The Zacks Consensus Estimate for third-quarter 2024 revenues is pegged at $4.1 billion, representing a year-over-year growth of 4.3%. For 2024, the consensus mark for revenues is pegged at $13.6 billion, indicating a rise of 5.9% compared to the previous year.
Stiff Competition Presents Challenges
Despite its impressive performance, Expedia faces intense competition from major players in the travel and tourism space, including TripAdvisor (TRIP), Airbnb (ABNB), and Booking Holdings (BKNG). While EXPE’s shares have outperformed TRIP, ABNB, and BKNG in the past month, their continuous efforts to strengthen online travel booking platforms pose a significant challenge. TripAdvisor launched a new feature allowing members to book hotel stays directly within the app thanks to its partnership with HTS (Hopper Technology Solutions). Airbnb introduced new features for group bookings, including an Icons category showcasing stays hosted by celebrities. Booking Holdings’ subsidiary, Priceline, partnered with Cover Genius to enhance travel bookings by offering customer-focused travel protection.
Earnings Estimates Show a Downward Trend
The Zacks Consensus Estimate for third-quarter 2024 earnings is pegged at $6.07 per share, indicating a year-over-year growth of 12.2%. However, the estimate has moved down by 8.2% in the past 30 days. For 2024, the consensus mark for earnings is pegged at $11.53 per share, suggesting growth of 18.9% year over year. This figure has been revised downward by 2.5% in the past 30 days.
Investment Outlook
Expedia’s strategic partnerships, robust key offerings, expanding global footprint, and drive towards innovation present a compelling investment opportunity. The company’s Value Score of A reflects a solid opportunity for investors. However, stiff competition and greater volatility in travel demands due to macroeconomic uncertainties and geopolitical tensions remain significant concerns for EXPE stock. The downward revision in earnings estimates also doesn’t bode well for the company’s future performance. Against this backdrop, existing shareholders should maintain their positions, while new investors should wait for a more favorable entry point. Expedia Group currently carries a Zacks Rank #3 (Hold).
