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Bear of the Day: Expedia (EXPE)

Madeleine Johnson

One of the biggest online travel companies in the world, Expedia (EXPE) offers users services like travel planning, travel purchases and travel experience sharing, plus all-in-one travel booking: hotel and resort, flights, car rentals, and vacation packages.

Shares Plunge After Disappointing Q3 Earnings

Last month, Expedia reported underwhelming earnings for its fiscal 2019 third quarter. Non-GAAP earnings of $3.38 per share lagged way behind the consensus estimate of $3.80; its bottom line also slumped 7% year-over-year. Revenue managed to grow 9% to $3.56 billion but also missed analysts’ expectations.

One of the factors that hit Expedia hard was a 10% year-over-year decrease in average revenue per ticket; management said this was due to a "reclassification of certain partner fees to other revenue and a shift in product mix.”

As a result, shares plunged more than 25% after the report was released. EXPE is now down almost 10% year-to-date compared to the S&P 500’s nearly 30% gain.

Expedia Group, Inc. Price and Consensus

Analysts have since turned bearish on Expedia, with 11 cutting estimates in the last 60 days for the current fiscal year. The Zacks Consensus Estimate has dropped 80 cents during that same time period from $6.99 to $6.19 per share. This sentiment has stretched into 2020, and our consensus estimate has fallen over one dollar in the past two months.

EXPE is now a Zacks Rank #5 (Strong Sell).

Looking Ahead

Expedia now expects full-year adjusted EBITDA to increase 5% to 8%, down from previous forecasts of 12% to 15% growth, due to both the company’s hotel booking website Trivago and its home and vacation rental platform VRBO having reduced profitability outlooks.

For those investors looking to add a travel industry peer to their portfolio, they could consider Booking Holdings (BKNG). The online travel company expects earnings growth of 9.5% for 2019.

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