Expedia stock experienced a sharp decline on Friday following the release of the online travel agency's cautious outlook for 2024 and the announcement of a new CEO. Although Expedia's earnings for the quarter exceeded expectations, certain travel measures fell short of Wall Street estimates, raising concerns about the overall health of the travel market.
Stock Plummets, Prompting Concerns
On Friday morning, shares of Expedia plummeted by nearly 18% to $131.21. This significant decrease reflects investor unease as they consider the implications of Expedia's cautious outlook and disappointing performance in some key travel metrics.
Leadership Changes and New CEO
Effective May 13, Ariane Gorin will replace current CEO Peter Kern, who will transition to the role of vice chairman and remain a member of the board. Gorin, having joined the company in 2013, brings extensive experience to her new position as she has served in multiple roles at Expedia, most recently as president for business. Barry Diller will continue to serve as Expedia's board chairman.
Fourth Quarter Financial Results
Expedia reported fourth-quarter revenue of $2.89 billion, representing a 10% increase compared to the previous year and aligning with Street consensus expectations. Gross bookings reached $21.67 billion, reflecting a 6% increase, slightly lower than the consensus target of $22 billion. Booked room nights totaled 77.4 million, growing by 9%, falling slightly short of the anticipated growth rate of 10% projected by analysts.
Solid Earnings and Ebitda Performance
Adjusted earnings per share were reported at $1.72, surpassing the Street consensus by five cents. Under generally accepted accounting principles, the company earned 92 cents per share. Adjusted Ebitda (earnings before interest, taxes, depreciation, and amortization) for the period reached $532 million, exceeding the Street's estimate of $524 million.
In conclusion, while Expedia's earnings for the quarter were positive, concerns arise due to discrepancies between travel measures and Wall Street estimates. Expedia's cautious outlook for 2024, combined with the announcement of a new CEO, have prompted a significant drop in the company's stock. However, leadership changes and solid financial performance indicate that Expedia remains well-positioned to navigate challenges and pursue growth opportunities in the travel industry.
Pressure Mounts for Expedia as Outlook for 2024 Appears Uncertain
Expedia, a leading online travel company, is facing increasing pressure as its CEO, Kern, provided cautious commentary on the company's outlook for 2024. During the recent analyst call, Kern expressed concerns over decelerating growth rates worldwide and potential softness in pricing across categories.
Additionally, Expedia's CFO, Julie Whalen, highlighted the challenge of tough comparisons in the first quarter. She explained that the company has been experiencing continued pressure in its airline ticketing business due to reduced pricing levels resulting from increased capacity and the grounding of the Boeing fleet. Similar pressure has also been observed in Expedia's VRBO business, which competes directly with Airbnb.
Despite these challenges, Whalen stated that the company expects gross bookings for the first quarter to increase by low-to-mid single digits, with revenue showing growth in the mid-single digits.
However, Citi analyst Justin Post reacted to this news by downgrading his rating on Expedia shares from Buy to Neutral. He also lowered his target price from $181 to $156. Post cited several factors contributing to his decision, including a potentially back-end loaded outlook for 2024, a slower-than-expected recovery in the VRBO business, increased marketing spending in highly competitive international markets, and Kern's impending departure as CEO.
In conclusion, Expedia is facing mounting challenges and uncertainties that are putting pressure on its stock. With a cautious outlook for 2024 and tough comparisons in the first quarter, the company must navigate these obstacles carefully to maintain its market position.