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On Friday, Citi analyst Jason Bazinet adjusted the price target for Expedia Group Inc. (NASDAQ:EXPE), reducing it to $177 from the previous $217, while keeping a Neutral rating on the stock. According to InvestingPro data, 11 analysts have recently revised their earnings estimates downward, with price targets ranging from $143 to $290. Bazinet’s assessment came in the wake of a noticeable slowdown in U.S. travel demand that extended into April, impacting Expedia’s first-quarter room night (RN) growth and second-quarter gross bookings (GB) guidance.
Expedia’s first-quarter RN growth decelerated to 6% year-over-year, a drop from the 12% year-over-year growth seen in the fourth quarter. This slowdown was slightly more pronounced than market expectations, with gross bookings approximately 1% below consensus. Despite these challenges, the company maintains impressive gross profit margins of 89.5% and achieved revenue growth of 5.6% over the last twelve months. The second-quarter GB guidance was set at 2-4% year-over-year, falling short of Citi’s anticipated 6% year-over-year increase.
The analyst highlighted that two-thirds of Expedia’s gross bookings originate from the U.S. market, which has experienced a 7% decline in inbound travel, including a significant 30% decrease in visitors from Canada. This trend positions Expedia as more vulnerable to domestic travel fluctuations compared to its peers, Booking Holdings (NASDAQ:BKNG) and Airbnb (ABNB).
Despite the challenging macroeconomic environment implied by the guidance, there were positive notes in Expedia’s performance. The company’s business-to-business gross bookings showed a robust 14% year-over-year increase, and advertising revenue grew by 20% year-over-year. Additionally, Expedia has implemented restructurings that are expected to yield $75 million in incremental cost savings, which should contribute to margin expansion in the future. InvestingPro analysis reveals the company maintains a strong financial health score of 3.21 out of 5, suggesting resilient operational efficiency.
In closing, Bazinet’s reevaluation reflects caution due to the limited visibility and significant exposure to the increasingly challenged U.S. travel market. The new price target of $177 takes these factors into account while maintaining a neutral stance on Expedia stock. According to InvestingPro analysis, Expedia currently appears slightly undervalued, trading at a P/E ratio of 18.2. For deeper insights into Expedia’s valuation and access to over 10 additional ProTips, explore the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Expedia Group has reported its first-quarter 2025 earnings, with an earnings per share (EPS) of $0.40, surpassing the forecast of $0.37. However, the company’s revenue of $2.99 billion fell short of the anticipated $3.02 billion. Despite the earnings beat, Expedia’s stock faced a downgrade from Piper Sandler, which shifted its rating from Neutral to Underweight, citing concerns over future U.S. travel demand and potential weaknesses in the business-to-consumer sector. Piper Sandler also revised its price target for Expedia to $135, down from $174, reflecting a more cautious outlook.
Expedia’s gross bookings increased by 4% to $31.5 billion, with room nights booked rising by 6%, indicating steady demand despite challenges in the U.S. travel sector. The company emphasized its focus on cost management and operational efficiency, resulting in an adjusted EBITDA margin expansion to 9.9%. Additionally, Expedia’s business-to-business (B2B) bookings and advertising revenue showed strong growth, while business-to-consumer (B2C) bookings remained weak.
Expedia introduced several AI-powered features to enhance user experience, aiming to drive long-term profitable growth. Looking ahead, the company projects Q2 2025 gross bookings growth between 2% and 4%, with revenue growth expected to be in the range of 3% to 5%. The company aims to expand its full-year EBITDA margin by 75 to 100 basis points, despite ongoing macroeconomic uncertainties.
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