Expedia Group (EXPE) Shares Surge: Partnerships and AI Drive Growth, But Competition Looms
Expedia Group, a leading online travel booking platform, has seen its shares climb 14.7% in the past month, outperforming the Zacks Internet Commerce industry (7.3%) and the Zacks Retail-Wholesale sector (6.7%). This strong performance is attributed to the company’s robust B2B, Brand Expedia, and advertising businesses, coupled with its strength in lodging offerings that have propelled its growth across both U.S. and international markets.
Key Takeaways:
- Expedia’s strategic partnerships are driving growth: The company has forged key alliances with major airlines, travel services, and financial institutions, bolstering its offerings and enhancing customer experience.
- AI integration promises to boost engagement: Expedia is incorporating generative AI technology into its services, aiming to personalize travel experiences and further increase user engagement.
- Competition remains a significant challenge: Expedia faces stiff competition from major travel players like TripAdvisor, Airbnb, and Booking Holdings, and their respective efforts to enhance their platforms are considerable.
- Earnings estimates are trending downward: While Expedia’s earnings are projected to grow in the near term, recent downward revisions to estimates highlight potential headwinds.
Expanding Partnerships: Fueling Expedia’s Momentum
The global travel and tourism market is poised for substantial growth, projected to reach $916 billion in 2024 and $1.11 trillion by 2029, according to Statista. Expedia is well-positioned to capitalize on this growth, fueled by its strategic partnerships designed to enhance customer experience and broaden its reach.
Notable partnerships include:
- Ryanair: Expedia offers access to Ryanair’s budget-friendly flights, expanding travel options and affordability for customers.
- Alaska Airlines: Stays by Alaska Vacation, a new platform offering exclusive deals and loyalty program benefits, enhances the travel experience through personalization.
- Wells Fargo and Mastercard: Two co-branded credit cards, One Key and One Key+, provide U.S. travelers with increased flexibility, rewards, and exclusive discounts on hotel bookings.
- Cathay: Integration of Expedia’s White Label Template technology into Cathay Holidays personalizes travel booking and planning experiences for customers.
- Tourism Australia: Partnerships with various Australian tourism agencies enhance traveler experiences, promote sustainability, and showcase Australia’s unique cultural offerings.
- Ikyu: Collaboration with the Japanese luxury hotel booking service expands Expedia’s reach to over 20,000 additional properties worldwide, enabling users to earn points for future bookings using EXPE’s Rapid API solutions.
These strategic alliances are expected to boost Expedia’s top-line growth. The Zacks Consensus Estimate for third-quarter 2024 revenues stands at $4.1 billion, reflecting a 4.3% year-over-year increase. For the full year, revenue is anticipated to reach $13.6 billion, signifying a 5.9% year-over-year rise.
The Shadow of Competition
While Expedia is experiencing significant growth, the travel and tourism industry is highly competitive. Major players like TripAdvisor (TRIP), Airbnb (ABNB), and Booking Holdings (BKNG) constantly strive for market dominance, posing a significant challenge for Expedia’s continued success.
- TripAdvisor has introduced a direct booking feature within its app, enabling users to reserve hotels directly through the platform, thanks to its partnership with HTS (Hopper Technology Solutions).
- Airbnb has enhanced its group booking capabilities and launched an "Icons" category showcasing luxury stays hosted by celebrities.
- Booking Holdings’ subsidiary, Priceline, has partnered with Cover Genius to improve travel protection offerings for customers, providing convenient access to policies, support, and instant claim payments.
While EXPE has outperformed its competitors in the past month, their relentless efforts to improve their platforms and expand their market presence present a formidable challenge for Expedia.
Earnings Estimates: A Cause for Concern?
While Expedia’s earnings are projected to grow in the near term, recent downward revisions to estimates raise concerns.
- Third-quarter 2024 earnings: The Zacks Consensus Estimate stands at $6.07 per share, indicating a 12.2% year-over-year increase. However, this estimate has been revised downward by 8.2% in the past 30 days.
- Full-year 2024 earnings: The consensus mark is pegged at $11.53 per share, suggesting a 18.9% year-over-year growth. This figure has been revised downward by 2.5% in the past 30 days.
These downward revisions highlight potential risks to Expedia’s earnings outlook, potentially stemming from intensifying competition, macroeconomic uncertainty, or geopolitical tensions impacting travel demand.
The Path Forward for Expedia Investors
Expedia’s strategic partnerships, strong core offerings, expanding global reach, and innovative efforts present a compelling investment opportunity. The company’s Value Score of A suggests a strong value proposition for investors.
However, the company faces significant challenges from fierce competition, and macroeconomic uncertainties could impact travel demand and negatively affect Expedia’s growth trajectory. Furthermore, downward revisions to earnings estimates signal potential near-term headwinds.
Given these factors, existing shareholders might consider maintaining their positions, while new investors might find it prudent to wait for a more favorable entry point before investing in Expedia Group. Expedia Group currently carries a Zacks Rank #3 (Hold).
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute investment advice. Before making any investment decision, it is recommended to consult with a qualified professional who can provide personalized advice based on your specific circumstances.
