Expedia's AI Integration And Efficient Tech To Propel Growth, Says Analyst

Oppenheimer analyst Jed Kelly reiterated an Outperform rating on the shares of Expedia Group Inc EXPE and raised the price target from $135 to $175.

The analyst expects lodging bookings to increase 10% and 8% Y/Y in FY24 and FY25, respectively, compared to a 9% growth in Q4 FY23.

Potential upside from the tech migration generating higher conversions, easing Vrbo comps, and re-entering key European markets might be beneficial, adds the analyst.

The analyst sees advertising leverage benefiting from a higher direct traffic in core B2C Markets (U.S./U.K./Australia) and increasing brand efficacy on One-Key's ability to highlight Big-3 Brands simultaneously.

The analyst sees tech migration reducing redundancies in cloud, licenses and maintenance, thus allowing engineers to focus on higher platform efficiencies around conversion/ operating expenditures.

According to the analyst, deeper AI integrations is expected to provide most immediate benefit to customer service.

The analyst forecasts management deploying $3.3 billion on stock repurchases in FY24/ FY25, equating to a 6% reduction in shares, while retiring $1 billion in debt, implying a net-debt ratio of 2x by 2025.

The analyst sees EBITDA growing at FY23E-FY25E CAGR of 13%, on 9% revenue growth, gross margins expanding 40 basis points, limited S&M leverage, and Opex growing 7%. 

So, according to the analyst, EXPE remains the top online travel pick into FY24E on higher operational efficiencies from unifying its tech-stack/loyalty-programs and increasing B2B scale.

Price Action: EXPE shares are trading higher by 2.69% at $149.41 on the last check Monday.