Buy Rating on Expedia Amid Travel Sector Recovery

Expedia's strategic positioning and financial metrics justify a Buy rating, according to Bank of America Securities analyst Justin Post. Despite a challenging Q2 for US travel, Expedia is well-positioned to benefit from a recovery, with significant US point of sale exposure and proactive cost-cutting efforts. Attractive valuation multiples, new airline partnerships, and strong free cash flow support the Buy rating with a price target of $211.

Expedia Group Inc (EXPE) is drawing renewed attention from investors, driven by signs of a rebound in U.S. travel demand. Analysts, particularly Justin Post from Bank of America Securities, have maintained a Buy rating on the company, with a price forecast of $211. Post attributes this optimism to a modest recovery in U.S. travel bookings, stabilizing trends since April, and several key tailwinds [1].

The recovery in U.S. travel demand is crucial for Expedia, as it is heavily entrenched in the domestic travel sector. Post emphasizes that these positive trends could strengthen investor confidence as bookings continue to improve. Additionally, the company's strategic partnerships with major airlines like Southwest Airlines Company (LUV) and Ryanair Holdings plc (RYAAY) are expected to bolster its business-to-business (B2B) and advertising segments, attracting a wider customer base and potentially increasing revenue from flight bookings and related services [1].

Expedia's financial performance indicators are robust. Post projects that Expedia's EBITDA will experience a 7% growth by 2025, with a conservative 2% growth within its business-to-consumer (B2C) segment. This forecast appears sustainable, considering Expedia's significant presence in both the U.S. and international markets. Moreover, the company's strong free cash flow profile and potential for a stock buyback of approximately 10% of its shares over the coming year can further uplift investor sentiment and enhance share value [1].

Despite lagging behind peer companies in stock performance this year, Expedia's present valuation stands at 5.8 times the anticipated EBITDA for 2026 and 9 times the expected free cash flow for the same year. These attractive metrics suggest a possibly undervalued stock ripe for consideration [1].

U.S. air travel patterns have indicated year-over-year reductions, particularly with spending on airlines decreasing by 10.9% in June, while lodging spending fell by 3.5%. However, these figures, although showing some decline, also display a level of stabilization when compared to prior months. Analysts believe that the stability observed could mitigate further cuts to future estimates, benefiting Expedia if travel demand continues to grow [1].

As of the latest market check, shares of EXPE have increased by 0.88% to $184.60, suggesting positive momentum in the stock as investors remain optimistic about ongoing recovery trends in the travel sector [1].

References:
[1] https://investorshangout.com/expedia-group-positioned-for-growth-amid-travel-demand-recovery-325269/
[2] https://www.benzinga.com/analyst-stock-ratings/analyst-color/25/07/46375448/expedia-gears-up-for-takeoff-as-travel-bookings-bounce-back