Expedia Group Inc: A Soaring COVID-19 Recovery Tech Play

Expedia stockThis Tech Stock Looks Interesting

If you’ve been following the markets, you’d know that tech stocks have been a highlight in what has turned out to be an extremely eventful year.

To put things in perspective, the S&P 500 rose by 9.8% since the beginning of 2020, while the tech-laden Nasdaq Composite surged by a substantially more impressive 30.7% in the same period.

But not every Nasdaq-listed tech stock was shooting through the roof. Expedia Group Inc (NASDAQ:EXPE), for instance, was left out of the tech rally, for the most part. And it should not come as a surprise: Expedia is an online travel shopping company.

You see, Expedia’s platforms are essentially travel fare aggregators and metasearch engines. If you were a frequent traveller—I imagine you are not one right now because of the global COVID-19 pandemic—you’ll likely have encountered some of the company’s web sites when searching for airline tickets or booking hotels, such as “Expedia,” “Hotels.com,” “Hotwire,” “trivago,” “Travelocity,” and “ebookers.”

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As I mentioned, the pandemic means most people haven’t been traveling nearly as much as before. To give you an idea, in April 2020, U.S. airlines carried just 2.9 million passengers systemwide (including both domestic and international flights), which was down a staggering 92.2% from a year ago. (Source: “April 2020 U.S. Airline Traffic Data,” Bureau of Transportation Statistics, July 16, 2020.)

So, as you’d expect, Expedia’s business was not doing that well.

In the second quarter of 2020, the company generated $566.0 million of revenue, which represented an 82% decline year-over-year. Gross bookings dropped 90% year-over-year, and adjusted earnings went from $1.77 per share in the year-ago quarter to a negative $4.09 per share. (Source: “Expedia Group Reports Second Quarter 2020 Results,” Expedia Group Inc, July 30, 2020.)

The company’s chief executive officer, Peter Kern, said that “The second quarter of 2020 represented likely the worst quarter the travel industry has seen in modern history and Expedia was of course not spared.” (Source: Ibid.)

But here’s the thing: after the sharp downfall, the travel industry has started to recover. While it’s far from being fully out of the woods, the numbers were starting to climb back up as early as in May.

Expedia Group Inc’s total gross bookings turned positive in May 2020 and the year-over-year decline moderated further in June. This pattern is consistent with the travel industry’s statistics.

The Bureau of Transportation Statistics showed that, after reaching a low of 2.9 million in April 2020, the number of passengers on U.S. airlines bounced back to 8.4 million in May, 15.4 million in June, 21.2 million in July, and 23.7 million in August.

And according to the preliminary results for September, the number continued to increase to $25.1 million. (Source: “U.S. Airlines September 2020 Passengers Decreased 65% from September 2019 (Preliminary),” Bureau of Transportation Statistics, November 12, 2020.)

Obviously, those numbers are still substantially lower compared to a year ago. But with continued month-over-month improvements, they suggest that the travel industry’s recovery is well underway.

Things have also started to look better at Expedia Group Inc.

In the third quarter of this year, the company earned $1.5 billion of total revenue, which marked a 165% increase quarter-over-quarter. Gross bookings totaled $8.6 billion, which more than tripled the second quarter’s $2.7 billion. At the same time, the company’s adjusted net loss narrowed to just $0.22 per share. (Source: “Expedia Group Reports Second Quarter 2020 Results,” Expedia Group Inc, July 30, 2020.)

Again, I should point out that, just like passenger airline transportation figures, Expedia’s numbers are still down quite a bit year-over-year. But the sequential improvement is a strong sign of recovery.

Expedia Group Inc (NASDAQ:EXPE) Stock Chart

Unsurprisingly, since its plunge in March and April, Expedia stock has started climbing back up.

Chart courtesy of StockCharts.com

As you can see from the chart, EXPE stock had a massive jump in early November.

That was due to the news of effective COVID-19 vaccines. While it could take many months to vaccinate everybody, the fact that effective vaccines are being developed was good enough for investors to warm up to this COVID-19 recovery tech stock.

At the time of this writing, Expedia stock is actually trading at a higher level than at the beginning of this year.

And that makes you wonder what the next move for EXPE stock could be.

Analyst Take

In my opinion, the long-term appeal of Expedia stock lies in the company’s growth potential—and I’m not referring to the ongoing economic recovery.

Consider that, in 2015, the company generated $6.6 billion of revenue and that, by 2019, the amount had increased to $12.1 billion. That’s top-line growth of 83.3% in just four years. (Source: “Expedia Group Reports Fourth Quarter and Full Year 2019 Results,” Expedia Group Inc, February 13, 2020.)

As it stands, there’s uncertainty regarding how long it will take for the travel industry to make a full recovery, even with a viable COVID-19 vaccine. That being said, Expedia’s sequential improvements and prior growth momentum makes it one of the top COVID-19 recovery stocks in the tech world.