Is Expedia Stock A Buy?

Expedia Group Inc (NASDAQ:EXPE) is part of the foundation of modern travel, which means it took a major hit from the 2020 novel coronavirus pandemic.

In fact, 2020’s tourism market is estimated to end at nearly 35 precent lower than the previous year, closing at $447.4 billion of earned revenue across the board.

This was caused by widespread travel restrictions and localized quarantines that effectively put a chokehold on the industry. This sent EXPE share prices into a downward spiral, begging the question is Expedia stock a Buy?

Expedia Revenues Crashed With Travel Bookings 

If you’ve never seen an Expedia ad, you’ve certainly seen one for one of its subsidiaries, which include Travelocity, Hotwire, Orbitz, and Trivago. Together, the group runs the online travel booking industry that was previously dominated by travel agents with expensive physical offices all over the world.

It’s one of the largest full-service travel services and offers a wide array of hotels, flights, car rentals, cruises, vacation packages, and more.

Expedia caters to both personal and business travelers and covers a wide array of travel options. The company generated $12.1 billion in revenue in 2019, which gave it a net income of $572 million for the year.

Although it has a wide range of offerings, hotel booking and other lodging accommodations account for 70 percent of Expedia’s total revenue. This put it in a precarious position in 2020, as lockdowns hit hospitality hard – the occupancy rate in July 2020 was only 47 percent, which was a 36.1 percent drop from 2019.

In fact, the company took an 82 percent revenue drop in the second quarter to end at a $577 million loss, as it was forced to deal with a tidal wave of trip cancellations and reschedules. Let’s talk about how this affected the stock’s market price.

Is Expedia Stock A Buy?

EXPE has traded consistently in the $100 range since 2015, but the coronavirus pandemic and subsequent travel bans cut the price to a low of $45.65 on March 18, 2020. This is the lowest the stock has been since 2012, and it has been a slow recovery.

However, CEO Peter Kern dismissed the virus affect during the company’s mid-year earnings call. Travel restrictions are already being slowly lifted, and travel is starting to pick back up in the consumer section, but there’s another industry affecting Expedia – business conventions.

Virtual conventions became the norm in 2020, with major events and conferences like CES are still scheduled to be virtual in 2021.

Meanwhile conventions like the Fancy Food Show, Sweets and Snacks Expo, E3, Comic-Con, and Outdoor Retailer’s Summer Market went virtual. These business conventions, trade shows, and exhibitions draw huge crowds that are no longer traveling.

CES drew 182,000 at its last physical event, and Comic-Con brought 135,000. E3 drew 66,100 people, while over 30,000 attend Outdoor Retailer. These business travelers spend more than consumers, and the loss of their bookings is hurting across the board.

With all that said, Expedia rose to prominence for offering travel savings and easy bookings. Neither of these will go out of style any time soon, and the company can find ways to increase existing revenue channels while opening new ones. But there are risks involved.

Risks of Buying Expedia Stock

The biggest risks to Expedia were highlighted by the coronavirus – the company essentially had its hands tied and was forced to handle a large volume of consumer bookings.

Over 20 airlines endured 100 percent suspension of operations in March 2020, and municipal restrictions are stretching through the end of the year.

While the travel industry is recovering, it’s a slow road that depends on both the ability and want of people to travel, and COVID-19 may have forever changed a few key parts of society that may forever devalue this stock.

First, there’s the business event industry highlighted above, which accounts for a sizeable portion of the company’s overall earnings.

Next is the issue of hotels like Hilton (NYSE:HLT), airlines like Delta (NYSE:DAL), car rental companies like Hertz (NYSE:HTZ), and cruise companies like Carnival Corp (NYSE:CCL) selling direct to consumer to avoid paying Expedia’s commissions.

Many of these brands are reconfiguring marketing budgets to double down on internal customer retention programs that bypass third-party booking sites altogether.

There’s also the competition.

Can Expedia Competitors Win?

Although Expedia is a major player in online bookings, it’s not the only one. Tripadvisor (NASDAQ:TRIP) and Booking.com (NASDAQ:BKNG) – which owns KAYAK, OpenTable, and Priceline, among others – are all still in the game, and this group is also competing with services provided by companies like American Express (NYSE:AXP) and Airbnb, both of which take a different approach.

American Express offers business travel and other booking services to some of its tiered cardholders. Meanwhile, Airbnb provides a marketplace for over 150 million users to offer their own lodging to compete with traditional hotels.

Each of these companies is taking a hit with reduced travel in 2020, and they’re scrambling to acquire lost customers. Expedia casts a large net, but it’s not guaranteed to win, as the competition is fierce on every end.

The company (and its shareholders) face the potential of major losses or having to execute an exit strategy if they can’t beat the competition to the smaller pool of potential customers.

Is Expedia Stock a Buy? The Bottom Line

Expedia disrupted the travel industry by making online booking cheaper and more accessible than ever. Both business and consumer travelers can use the site to book any piece or an entire vacation or business trip.

This technology and the SEO reach of its subsidiaries give the company a chance to recover and even prosper alongside the travel and tourism industries.

The stock price has mostly recovered into its $100 range post-coronavirus, and investors should take a look at its past five-year performance to get an idea of how it’ll fair through 2025.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.