Expedia (NASDAQ: EXPE), a travel company providing everything from airline tickets, hotel rooms, and car rentals, to cruises, is scheduled to announce its fiscal third-quarter results on Thursday, November 2. We expect Expedia’s stock to likely trade higher with revenues and earnings beating consensus estimates marginally. The company is benefiting from travel demand that has remained resilient despite macro headwinds. The B2B segment has outperformed Expedia’s retail side in terms of growth, while also driving margins higher. Looking ahead, EXPE reiterated its full-year outlook of double-digit top-line growth with margin expansion. In Q3, it expects year-over-year gross bookings growth to accelerate to the high single-digits. The company also expects Q3 revenue growth to be lower than gross bookings growth, driven by the prior quarter’s reduced verbal bookings converting to stays.
EXPE stock has faced a notable decline of 25% from levels of $130 in early January 2021 to around $95 now, vs. an increase of about 10% for the S&P 500 over this roughly 3-year period. However, the decrease in EXPE stock has been far from consistent. Returns for the stock were 36% in 2021, -52% in 2022, and 6% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 7% in 2023 – indicating that EXPE underperformed the S&P in 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and TM, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could EXPE face a similar situation as it did in 2022 and 2023 and underperform the S&P over the next 12 months – or will it see a recovery?
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