Expedia Group, Inc.

 

EXPE Details
 
Third Quarter Revenue up by 9%:Expedia Group, Inc. (EXPE) is one of the top online travel companies worldwide. The company’s web portals aim at travel scheduling, travel purchases and travel experience sharing, thus, bringing both suppliers and consumers together based on travel-related services. The websites also offer particulars related to places that can be visited, maps, local restaurants, special offers and other things to do in order to help customers to view their options, participate in offers and book according to their preferences. On 11 December 2019, Expedia Group’s business travel management firm, Egencia®, stated that it has been positioned as a market leader in the IDC MarketScape.
 
Managerial Changes: On 4 December 2019, the company announced that Mark Okerstrom has stepped down from the CEO’s post. It also stated that Alan Pickerill has resigned from the position of CFO. Pursuant to the above changes, the company’s executive leadership team and day-to-day operations will be looked after by Barry Diller, Chairman of the Board.
 
Financial Highlights for Third Quarter Ended 30 September 2019: Expedia Group, Inc. delivered adjusted earnings of $3.38 per share during the quarter, down 7% on year-over-year basis.  Revenue came in at $3.56 billion, an increase of 9% year over year. The increase was primarily driven by strong performance of Expedia Partner Solutions, Vrbo and Hotels.com. Moreover, increasing lodging portfolio positively impacted the quarter. The company’s gross bookings for the quarter came in at $26.93 billion, up 9% year over year.
 

Q3 Financial Highlights (Source: Company Reports)
 
Revenue by Segment:  Revenue from the Core OTA segment came in at $2.73 billion. This marked an improvement of 8% from the year-ago period. Egencia revenue went up by 4% and stood at $145 million. Revenue from Vrbo increased by 14% and came in at $467 million for the quarter. Revenue from trivago plumped 6% and came in at $279 million.  
 
Operating Highlights: The company reported adjusted EBITDA of $912 million, which was in-line with year-ago quarter’s figure. Moreover, adjusted selling and marketing expenses during the quarter increased 11% year over year and came in at $1.63 billion. Further, general and administrative expenses increased by 8% to $182 million for the quarter.
 
Balance Sheet & Cash Flow Details:  The company exited the quarter with cash and cash equivalents of $3.79 billion. Net cash used in operating activities came in at $861 million as compared to $371 million in the prior corresponding quarter.Further, free cash flow came in at -$1.15 billion.The company paid quarterly dividend of $50 million during the third quarter, representing a payment of $0.34 per common share.
 
Valuation Methodology:
 
Method: Price to Earnings Multiple Approach

Price to Earnings Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: As per NASDAQ, the stock is trading below the average of its 52-week high and low of $144 and $93.53, respectively. As on 23^rd December 2019, the company’s market capitalisation stood at ~$15.65 billion, with a price to earnings multiple of 32.34x. The company stands to benefit from a robust supply chain, acquisition synergies, strategic investments and product improvement. These plans are expected to push business in the days ahead. Vrbo’s increasing online bookable listings remains a key catalyst. Considering the above factors, we have valued the stock using one relative valuation method, i.e., Price to Earnings multiple and arrived at a target price of lower double-digit upside in % terms. Hence, we give a “Buy” rating on the stock at the current market price of $108 per share, down by 1.89% on 23^rd December 2019.  
 
 
EXPE Daily Technical Chart (Source: Thomson Reuters)

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