Analyzing Expedia's 4Q15: Is a Brighter 2016 Ahead?
Gross bookings see strong growth
Expedia’s (EXPE) 4Q15 gross bookings grew at a solid 40% year-over-year (or YoY), with both its Core OTA (online travel agency) and Egencia businesses contributing to growth.
Strong performances at brands Expedia and Hotels.com helped to boost Expedia’s OTA bookings by about 44% YoY. Domestic bookings grew by 50% YoY, and International bookings grew by 26% YoY.
For the full year, total gross bookings increased 24% YoY, driven by growth in the Core OTA business as well as some inorganic impact from acquisitions.
Strong negative impact from the US dollar
The US dollar witnessed strong appreciation in 2015 amid growing global turmoil and the Fed’s decision to hike rates. Expedia earns almost 36% of its revenues from international business, where it earns in local currencies. This means lower revenues when translated to dollars. For 4Q15, EXPE saw a -5% foreign exchange impact on its revenues.
Expedia’s revenue growth
EXPE’s strong growth in bookings partially offset the impact of the US dollar and was also reflected in the top line of the company, which grew by 29% YoY during 4Q15, with 22% growth in international revenues and 34% growth in domestic revenues. 2015 revenues grew by 19% YoY, with 22% growth in domestic revenues and 15% growth in international revenues.
Expedia’s growth is dependent on travel demand, which in turn is highly correlated to global economic growth. The global macroeconomic environment continues to remain uncertain. Despite this uncertainty, the IATA (International Air Transport Association) expects travel demand to grow by 6.7% in 2016. Higher travel demand could mean higher revenues for Expedia.
However, Expedia expects headwinds from the strong US dollar to continue in 2016, adversely impacting its revenues.
EXPE makes up 1.4% of the Guggenheim S&P 500 Pure Growth ETF (RPG). Its rivals include Priceline (PCLN), TripAdvisor (TRIP), and Ctrip.com (CTRP). For a complete overview of Expedia, please read An Investor’s Complete Guide to Expedia.
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