Can Expedia Stock offer more benefits?

Expedia’s stock (NASDAQ: EXPE), a travel agency providing everything from plane tickets to hotel rooms, car rentals and cruises, is more than 3.5 times higher than the March 2020 lows of around $ 49 (when larger markets bottomed due to the spread of Covid-19) at $ 176 currently. In fact, the company’s stock is now 43% above its peak of around $ 129 before the pandemic (February 2020). Now, are any further gains likely for EXPE stock? We believe the company remains overvalued at a 5x price-to-sell ratio, and could likely take a downward correction based on its long-term historical multiples. The point is, the company was grappling with increasing pressure from Google

GOOG
in advertising, and agile startups like Airbnb, even before the pandemic. Expedia

EXPED
has had to take on a lot of additional debt to get through the current period of liquidity consumption, bringing its total indebtedness to over $ 8 billion. Plus, with the upsurge in Covid-19 cases, it looks like Expedia will be a more heavily indebted company when this is all over. Needless to say, growing competitive threats and heavy leverage could cause Expedia’s stock price to drop in the longer term.

Expedia stock has underperformed the broader markets between fiscal 2018 and today. The company’s stock is about 56% higher than it was at the end of fiscal 2018, compared to 66% growth for the S&P. Our dashboard, What factors led to a 56% change in Expedia stock between fiscal 2018 and today? provides the key figures that underpin our thinking, and we explain more below.

Expedia shares rose 18% from about $ 113 at the end of fiscal 2018 to about $ 132 at the end of fiscal 2020. While the company’s revenue per share fell 50% during that time – thanks to pandemic-related restrictions, the company’s stock price climbed at the end of fiscal 2020 on optimism about the news of vaccine trials. Also note that Expedia’s P / S was around 1.5x over the 2018-2019 period. It appeared higher in 2020, as the reported drop in RPS caused the P / S ratio to appear higher at this point. The company’s P / S ratio fell from around 1.5x at the end of fiscal 2018 to 3.5x at the end of fiscal 2020. While the company’s P / S is d ‘About 5x now there is a downside risk when the current P / S is over the levels seen last year.

What is the impact of the coronavirus on Expedia’s inventory?

The travel industry was beaten in 2020 as the onset of the pandemic drove people to stop traveling, forcing travel agencies such as Expedia to shut down their global offices and cut a quarter of their workforce. As is evident, Expedia’s revenue declined 57% year-on-year in 2020, largely due to a 66% year-on-year decline in its gross bookings. In addition, the company’s earnings per share recorded a loss of $ 19.00 in fiscal 2020, compared to a profit of $ 3.84 in 2019. Going forward, the company faces its challenges. negative free cash flow of $ 4.6 billion in 2020, compared to $ 1.6 billion. in positive free cash flow the previous year. It must therefore generate at least $ 6 billion to return to normal. While Expedia still has $ 3.36 billion in cash and $ 2 billion in revolving credit lines, reducing its significant debt will depend heavily on the company’s post-pandemic recovery. While many parts of the world are still stranded, Expedia will continue to experience difficult times in the near term as the business environment still appears uncertain.

Want to be exposed to the increasing digitization of the economy through and after Covid-19? Discover our theme on Internet infrastructure actions

See everything Trefis price estimates and To download Trefis data here

What is behind Trefis? See how this fuels the new collaboration and assumptions Finance Directors and Financial Teams | Product, R&D and marketing teams

Comments are closed.