What Happened?
Shares of online travel agency Expedia (NASDAQ: EXPE) jumped 17.9% in the morning session after the company reported strong fourth-quarter results that exceeded analysts' expectations across key metrics, including revenue, EPS, and EBITDA. Sales growth was driven by a 13% increase in total gross bookings as the company observed "better-than-expected travel demand." Margins expanded, with adjusted EBITDA rising 21% and adjusted EBIT growing 50%, benefiting from sales growth and operational efficiency. While management didn't provide formal guidance, they signaled confidence in long-term growth by reinstating a $0.40 quarterly dividend. Overall, we think this was a good quarter with some key areas of upside.
Following the results, HSBC upgraded the stock from Hold to Buy, citing "Encouraging trends across leisure, B2B, advertising + int'l."
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What The Market Is Telling Us
Expedia’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. Moves this big are rare for Expedia and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 12 months ago when the stock dropped 20.3% on the news that the company reported fourth-quarter results showing revenue growth stalled as its gross bookings came in lower than expected due to a reduction in average air ticket prices and pressures from the Middle East crisis.
On the other hand, Expedia beat analysts' adjusted EBITDA expectations this quarter. Expedia's demand outlook wasn't so encouraging. While it expects travel demand to remain relatively healthy, growth rates across the world are expected to decelerate.
Looking ahead, the company expects gross bookings in Q1 to be in the low single digits, with revenue growth in the mid-single digits.
The Management added that it continued to see" continued pressure in air business due to reduced pricing levels from increased capacity and the grounding of the Boeing fleet, as well as some pressure in our Vrbo brand."
To lead the company moving ahead, the company announced the appointment of Ariane Gorin as CEO, succeeding Peter Kern, who will transition to the role of Vice Chairman and continue as a member of the Board of Directors, ensuring a smooth transition. Ariane Gorin has been at Expedia since 2013, where she has served as President of Expedia for Business. Overall, this was a mediocre quarter for Expedia, and the market was likely looking for more bookings.
Expedia is up 7.6% since the beginning of the year, and at $199.33 per share, has set a new 52-week high. Investors who bought $1,000 worth of Expedia’s shares 5 years ago would now be looking at an investment worth $1,811.
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