Expedia Faces Challenges: Analysts Concerned About Vrbo's Slow Start and B2C Growth

Benchmark analyst Daniel Kurnos reiterated Expedia Group EXPE with a Buy and a $180 price target.

Expedia reported first-quarter sales of $2.89 billion, up by 8.4% year-on-year, beating the analyst consensus estimate of $2.81 billion. EPS loss of $(0.21) beat the analyst consensus estimate of loss of $(0.24).

Kurnos noted that Expedia didn’t benefit from having a better gross bookings outlook for the year compared to Booking Holdings Inc BKNG. Instead, it faced a softer start in 2024 for Vrbo and slower-than-expected growth in its core B2C, leading to an immediate reduction in fiscal 2024 guidance. 

Also Read: Airbnb Faces Growth Hurdles Despite Strong Consumer Preference, Analysts Warn

Unfortunately, the analyst noted that due to the lower expected revenue and additional marketing spend to boost Vrbo, the narrative that Expedia can’t compete and expand margins is likely to resurface today.

With the lowered guidance, a February reduction in force, and over $4 billion remaining for buybacks, Kurnos says the downside risk now seems more limited to macroeconomic factors.

Wedbush analyst Scott Devitt maintained Expedia with a Neutral and lowered the price target from $130 to $125.

Devitt noted that shares were down ~9% after-hours, broadly reflecting elevated investor concerns as second-quarter and fiscal 2024 guidance were revised lower, primarily impacted by slower-than-expected traffic growth and conversion at Vrbo and Hotels.com following the company’s unified

tech stack migration. As a result, Expedia guided second-quarter Y/Y gross bookings growth in the mid-single digit range (below Devitt’s prior estimate of +10% Y/Y) and full-year guidance of mid- to high-single-digit growth Y/Y (below prior consensus of +9% Y/Y).

Management expects second-quarter margin compression of over ~100bps Y/Y and full-year adjusted EBITDA margin roughly flat versus 2023 as the company invests more aggressively to support ongoing business initiatives that will likely reinvigorate underlying growth, he noted.

Oppenheimer analyst Jed Kelly maintained Expedia with an Outperform and lowered the price target from $175 to $155.

Kelly lowered EXPE fiscal 2024 EBITDA by 4% and fiscal 2025 EBITDA by 7% due to Vrbo’s elongated recovery requiring higher marketing reinvestment. This caused management to reduce its fiscal 2024 margin outlook to “flat” vs. ~+70bps previously. 

Buy-side conversations implied some were expecting an estimated cut. Therefore, Kelly noted some shorter-term investors being incremental buyers on weakness from numbers resetting and easing Vrbo comps. 

Kelly flagged the impact of share shifts to Airbnb in core Vrbo markets. The analyst remains encouraged by Hotels nights growing ~10–11% and structurally higher gross margins.

Mizuho analyst James Lee maintained Expedia with a Neutral and lowered the price target from $140 to $135.

Lee noted that the company had a solid quarter due to One-Key and increased marketing efforts. However, Vrbo’s progress needed to be tracked behind expectations due to traffic migration. As a result, management lowered fiscal 2024 guidance with a top line going to mid- to high-single-digit from 10% and EBITDA margin to flat YoY in fiscal 2024 vs. up 75 bps for prior guidance. Lee cut fiscal 2026E EBITDA by nearly 5% to $3.5 billion. Lee noted he could be more constructive on the name if the One-Key can drive sustainable double-digit growth.

BMO Capital analyst Brian Pitz downgraded Expedia from Outperform to Market Perform and lowered the price target from $165 to $145.

Pitz said Vrbo adoption is slower than expected despite the tech migration buildout and ramping marketing dollars in the first quarter of 2024. He noted that Hotels.com’s growth unexpectedly stalled due to tech migration complexities and a loyalty revamp towards One Key. Expedia will lean more meaningfully into marketing to support Vrbo in 2024, which could prove favorable, although visibility is limited now, as per the analyst.

Piper Sandler analyst Thomas Champion downgraded Expedia from Overweight to Neutral and lowered the price target from $175 to $145.

With outgoing CEO Kern passing the baton to new CEO Ariane Gorin, management also lowered guidance for the year and confirmed what the stock has priced in for some time, Champion noted.

The analyst added that bookings growth is deteriorating while the margin uplift from tech improvements and a recent workforce reduction still needs to be discovered. He moved to the sidelines to regroup.

BofA Securities analyst Justin Post reiterated a Neutral rating on Expedia with a price target of $147, down from $156.

Post noted the fiscal 2024 full-year outlook as more achievable. Still, any reacceleration thesis driven by tech re-platforming seems like a stretch, while he remained even more cautious about possible Vrbo recovery vs. innovative competitors. Post expects market share valuation overhang to continue.

Expedia Group stock gained nearly 30% in the last 12 months. Investors can gain exposure to the stock via AdvisorShares Hotel ETF BEDZ and Hennessy Stance ESG ETF STNC.

Price Action: EXPE shares traded lower by 14.2% at $116.77 on the last check Friday.

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