Brianne Gardner Expedia EXPE-Q DON'T BUY Dec 01, 2023

Though expectations were low, they just delivered excellent numbers. Gross booking slightly missed, but revenue and adjusted EPS beat, and this was largely due to their share buyback of $1.8 billion in the first 9 months of this year. They will buy back another $5 billion, too. They will amount o a third of their shares. Also, they reiterated guidance for double-digit topline growth. Investments in their loyalty program are working. Trades at a low 9x 2024 PE though he doesn't understand why it's so low.

It's up 43% in November so far. He added it before that move, so he's glad. They benefit from having less activity in the Middle East than Booking Holdings. 

Expedia was down 16% in May after reporting a bad quarter, caused by poor consumer demand in the US and a multi-day outage in their home rental platform.

Very competitive marketplace. Down today on overwhelming concern about consumer spending and prospects for travel for the next 12 months. BKNG is better positioned than EXPE, because Expedia's multiple brands cause confusion.

Generative AI is a concern for the future, as it may circumvent the go-between status of BKNG and EXPE and provide a personalized travel experience.

Airlines in general have high debt levels, economic risk, sensitivity to the consumer, fuel price volatility. In the travel space, he'd rather own a BKNG or EXPE, where there are no capital costs. Or even a cruise line, which has demographics behind it.

It's missed earnings 3 times this year, but the shares have recovered each time. They can't establish any fundamental or technical momentum, and difficult comps lie ahead. 

BOOK decided to be an agent only, so they take a commission on every transaction. Operating margins of 30%. Investors like the capital-light model, giving it a higher multiple between high 20s or almost 30x PE. Today though, PE in low 20s.

EXPE buys hotel rooms in bulk and then resells them; takes more risk and more capital. Operating margins of 10%. PE usually around 20x. PE today is in low teens. Though not as good a business, valuation discount is excessive. Better risk/reward.

Recent purchase. It's down 24% from recent highs, so it was an attractive entry point. Global travel demand remains resilient; higher than pre-pandemic, and holding steady. Consumer remains resilient. Lots of brands allows it to server diverse customer segments. Improved digital platform. Strong cashflow. Yield is 1.0%.

Interestingly, remote work trend allows people to work from...wherever. Earnings growth rate is ~19%, paying only 11x forward earnings, so a pretty good PEG ratio.

Leader in the space. Online travel booking is a key element in the industry. Travel is resilient, and it has long-term demographic trends in its favour. Work-from-home can just as easily be work-from-Bermuda. 

Share drop is overdone. Now near 200-week MA. High-quality name. Earnings growth projected at 20% going forward. Strong cashflow. Online platform means it doesn't have to worry about capital expenditures. Yield is 1.05%.