Expedia's Attractive Valuation and Closing Gap to Peers

The global travel sector continues to rebound from pandemic-era disruptions, with investors increasingly scrutinizing valuations and operational resilience. Among the key players, Expedia Group (EXPE) stands out as a compelling case study. While its peers, such as Booking Holdings (BKNG) and Priceline (now part of Booking Holdings), dominate market share and profitability, Expedia's valuation metrics and strategic initiatives suggest it is undervalued relative to its growth potential and margin expansion trajectory.

Valuation Metrics: A Tale of Two Models

Expedia's forward P/E ratio of 14.36 and EV/EBITDA ratio of 14.64 position it as a more affordable option compared to Booking Holdings, which trades at 18.53x forward P/E and 16.19x EV/EBITDA. These disparities reflect divergent business models: Booking Holdings' agency-centric approach generates higher-margin revenue (44.90% operating margin) compared to Expedia's 25.57%. However, affordability alone does not justify undervaluation. The critical question is whether Expedia's operational improvements can bridge this gap.

Data from Q3 2025 indicates progress. Expedia reported a 208-basis-point expansion in its Adjusted EBITDA margin to 32.9%, driven by disciplined marketing optimization and cost control. This outperformed Booking Holdings' historical EBITDA margins, which, while robust, have shown less dynamic growth. Furthermore, Expedia's B2C segment achieved a 4-point EBITDA margin increase to 41%, underscoring its ability to leverage digital efficiency.

Strategic Initiatives: Fueling Margin Expansion

Expedia's margin expansion is not accidental but the result of targeted strategies. The company has prioritized AI-driven cost efficiency, optimizing marketing spend by reallocating resources to high-performing channels. For instance, its B2B segment grew bookings by 26% year-over-year, reflecting the success of partnerships with travel agencies and corporate clients.

Additionally, Expedia is enhancing its product mix by emphasizing high-margin offerings such as advertising and insurance. These initiatives align with broader industry trends, where ancillary revenue streams are becoming critical to profitability. By contrast, Booking Holdings' reliance on its core booking model, while stable, leaves less room for innovation-driven margin gains.

Peer Comparison: Closing the Gap

Priceline's 2025 EV/EBITDA ratio of 17.4x further highlights Expedia's valuation edge. While Priceline's premium reflects its brand strength and global reach, it also implies higher expectations for growth. Expedia, with a lower valuation multiple, offers a margin of safety for investors willing to bet on its operational turnaround.

Moreover, Expedia's 35.76% total return over the past year versus Booking Holdings' -7.74% demonstrates its ability to outperform in volatile markets. This performance is not merely a function of valuation but a reflection of management's agility in adapting to shifting consumer preferences and macroeconomic conditions.

Risks and Considerations

Critics may argue that Expedia's lower operating margin and smaller market cap ($30.62 billion vs. Booking's $158.54 billion) limit its scalability. However, these metrics also indicate untapped potential. Expedia's focus on cost discipline and AI-driven efficiency could narrow the profitability gap with peers over time. Additionally, its lower valuation provides a buffer against short-term volatility, a critical factor in a sector prone to cyclical swings.

Conclusion: A Case for Rebalancing Portfolios

Expedia's valuation metrics, coupled with its margin expansion initiatives, present a compelling case for undervaluation. While Booking Holdings and Priceline remain dominant, their premium valuations reflect mature business models with limited upside. Expedia, by contrast, offers a blend of affordability, operational momentum, and strategic innovation. For investors seeking exposure to the travel sector, Expedia represents a high-conviction opportunity to capitalize on a closing valuation gap and a reinvigorated margin trajectory.