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

Zinger Key Points
  • EXPE remains the analyst's top Online Travel pick into ‘24E.
  • The analyst expects lodging bookings to increase 10% and 8% Y/Y in FY24 and FY25 respectively.

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.

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