Analysts at Wedbush have upped their price target on Expedia Group Inc (NASDAQ:EXPE, ETR:E3X1) after the online travel agency posted “better-than-feared” second quarter earnings amid moderating demand trends and macro uncertainty, tightening booking windows, and softer pricing across flights and hotels.
“Though management’s guidance for both Q3 and the full year were modestly below estimates, outperformance this quarter should partially offset weaker demand trends in the second half,” the analysts wrote in a note to clients.
“While Expedia is observing a similar slowdown [to peers] in global travel demand, Q2 results were notably strong relative to peers and the company continues to make progress in longer-term oriented initiatives (app usage, retention rates, loyalty participation, etc.) that could support stronger growth in a more normalized environment.”
The analysts highlighted that Expedia's Q2 room night growth of 10% year-over-year was ahead of Street estimates of 200 basis points.
Vrbo was a bright spot, posting sequential improvement to exit Q2 with positive growth following a period of investment to drive healthier engagement and conversion, they added.
As such, the analysts raised their price target for Expedia to $130 from $125 and awarded it a ‘Neutral’ rating.
Expedia shares traded 9.3% higher at $129 on Friday afternoon.
“While our near-term estimates have been lowered, our model changes reflect the strength of the company's beat in Q2, as Expedia balances investments to support sustainable traffic improvements at Vrbo and Hotels.com, international expansion, and ongoing adoption of One Key,” analysts wrote.
“We continue to recommend both Airbnb Inc (NASDAQ:ABNB, ETR:6Z1) and Booking Holdings Inc (NASDAQ:BKNG, ETR:PCE1) for exposure to the online travel sector given their leading competitive positions and strong free cash flow dynamics as underlying demand trends remain uncertain.”