Expedia shares experienced a 10% increase in afterhours trading following strong third-quarter results. This surge in share value supports the belief that concerns regarding sales and marketing expenses are unfounded. The company’s narrow-moat status, combined with its undervalued shares, suggests that its forward EV/EBITDA multiple of 5 times could increase to around 8 times, approaching pre-pandemic levels. Expedia’s investment headwinds are expected to become tailwinds by 2024, leading to a positive outlook for the company’s financial performance.
Despite challenges such as the fires in Maui, turmoil in the Middle East, and disruptions related to rebranding Vrbo, Expedia managed to exceed expectations with a growth rate of 7% in bookings, higher than the projected 5%. Sales growth in the business-to-consumer segment also reaccelerated significantly, while the business-to-business division showcased robust sales growth of 26%. Expedia’s network advantage remains intact, and engineers are focusing on optimizing the platform by leveraging shared data, loyalty, supply, and marketing expertise. Furthermore, the company’s EBITDA margins have expanded by 110 basis points, reaching nearly 31%.
Expedia’s positive performance is a result of the transition from headwinds to tailwinds, with marketing leverage in the business-to-consumer sector indicating improved platform efficiencies. The company anticipates double-digit sales growth and further EBITDA margin expansion in 2024. However, slower economic growth due to inflation and reduced consumer savings may impact revenue growth next year. Despite these factors, Expedia remains well-positioned for continued success in the future.
