Expedia stock downgraded to hold on underperforming B2C sector By Investing.com

On Wednesday, Expedia Group Inc. (NASDAQ:) shares experienced a shift in its stock rating as TD Cowen changed its stance from “Buy” to “Hold.” Accompanying this downgrade, the firm set a price target for Expedia at $150.00. The adjustment follows a period of observed weakness in the company’s business-to-consumer (B2C) segment, which reported a modest growth of 1% in gross booking value (GBV) for the second quarter.

The analyst from TD Cowen cited several reasons for the downgrade, including consecutive guide cuts over the past three quarters driven by the underperforming B2C sector. Concerns were also raised about the potential for a protracted recovery period that might be required for this segment to improve. Moreover, the firm noted that Expedia’s advertising expenditure is projected to increase to 50% of its revenue in its 2024 estimates, with an estimated business-to-business (B2B) revenue share of 55-60%.

Another factor contributing to the shift in rating is the anticipated challenge Expedia may face in 2025 with cost-cutting comparisons. While the analyst acknowledged the current price-to-earnings (P/E) discount of 33% compared to Booking Holdings (NASDAQ:) Inc. and the S&P, the expectation is that any acceleration in the fourth quarter earnings will likely be influenced by comparables and foreign exchange rates. The price target of $150 is based on 14 times the estimated P/E for 2025.

The downgrade comes amid a broader context where Expedia’s financial performance and strategic decisions are being closely monitored by investors. As the company navigates through these operational challenges, the market will be watching for signs of improvement or further adjustments. The new target set by TD Cowen reflects the firm’s current view of Expedia’s balanced risk/reward profile in the face of these headwinds.

In other recent news, Expedia Group has seen significant developments in its business operations. The company’s B2B segment marked $25 billion in bookings and over $100 million in room nights in 2023, as revealed during a recent earnings call by CEO Ariane Gorin. This growth, distinct from the consumer business, has been propelled by loyalty use cases, international markets, and corporate travel.

On the analyst front, Truist Securities initiated coverage on Expedia with a Hold rating, while Cantor Fitzgerald began coverage with a Neutral rating, noting challenges at Hotels.com. B.Riley, however, sustained its Buy rating for the company, expressing optimism in Expedia’s B2B offerings.

In other company news, Peter Kern has stepped down from his role as Vice Chairman and member of the company’s Board of Directors. The company has not disclosed any further details regarding the departure or any plans for a replacement Vice Chairman. Lastly, the company’s One Key loyalty program, which aims to tie together Expedia, Hotels.com, and Vrbo in the US, has been paused internationally for reevaluation.

InvestingPro Insights

As Expedia Group Inc. (NASDAQ:EXPE) contends with a rating change and a new price target from TD Cowen, real-time data from InvestingPro provides a deeper look into the company’s financial health and market performance. With a market capitalization of $19.26 billion and a P/E ratio of 24.93, Expedia’s valuation is a key consideration for investors. Notably, the company’s gross profit margin stands impressively at 88.9%, highlighting its ability to retain a significant portion of revenue after accounting for the cost of goods sold in the last twelve months as of Q2 2024.

InvestingPro Tips reveal that Expedia has been actively repurchasing shares, which can be a sign of management’s confidence in the company’s future performance. Moreover, despite 15 analysts revising their earnings downwards for the upcoming period, the company is still expected to be profitable this year. This juxtaposition of share buybacks and analyst caution paints a nuanced picture of Expedia’s outlook. It’s worth noting that there are 11 additional InvestingPro Tips available for investors seeking a more comprehensive analysis, which can be found at https://www.investing.com/pro/EXPE.

Investors should also be aware that the stock’s price movements have been quite volatile, and the Relative Strength Index (RSI) suggests the stock is currently in overbought territory. This could indicate a potential pullback or consolidation in the near term. As Expedia continues to evolve its business strategy and respond to market conditions, these insights may prove valuable for those looking to make informed investment decisions.

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