Expedia (NASDAQ:EXPE) Misses Q4 Sales Targets, Stock Drops

Anthony Lee /
2023/02/09 4:10 pm EST
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Online travel agency Expedia (NASDAQ: EXPE) fell short of analyst expectations in Q4 FY2022 quarter, with revenue up 14.9% year on year to $2.62 billion. Expedia made a GAAP profit of $175 million, down on its profit of $395 million, in the same quarter last year.

Is now the time to buy Expedia? Access our full analysis of the earnings results here, it's free.

Expedia (EXPE) Q4 FY2022 Highlights:

  • Revenue: $2.62 billion vs analyst estimates of $2.7 billion (3.04% miss)
  • EPS (non-GAAP): $1.24 vs analyst expectations of $1.69 (26.6% miss)
  • Free cash flow was negative $359 million, compared to negative free cash flow of $1.17 billion in previous quarter
  • Gross Margin (GAAP): 84.3%, up from 82.7% same quarter last year
  • Stayed Room Nights: 74.6 million, up 11.7 million year on year

“We were pleased that we were able to deliver our most profitable year in 2022, despite the friction from transforming our business model and technology platform. While our Q4 results were negatively impacted by severe weather, demand was otherwise strong and accelerating, and has been markedly stronger since the start of the year,” said Peter Kern, Vice Chairman and CEO, Expedia Group.

Originally founded as a part of Microsoft, Expedia (NASDAQ: EXPE) is one of the world’s leading online travel agencies.

Because of the enormous number of flights, hotels, and accommodations available, travel is a natural fit for marketplaces that aggregate suppliers, simplifying the shopping process for consumers. Online travel platforms today make up over 50% of the industry’s bookings, a percentage that has been rising for 20 years, and will likely continue in the years ahead.

Sales Growth

Expedia's revenue growth over the last three years has been very strong, averaging 35.1% annually. The initial impact of the pandemic was negative for Expedia's revenue, but growth rates subsequently normalized.

Expedia Total Revenue

This quarter, Expedia reported a mediocre 14.9% year on year revenue growth, and this result fell short of what analysts were expecting.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Usage Growth

As an online travel company, Expedia generates revenue growth by a combination of increasing the number of stays (or experiences) booked, as well as the level of commission charged on those bookings.

Over the last two years the number of Expedia's nights booked, a key usage metric for the company, grew 51.5% annually to 74.6 million users. This is among the fastest growth of any consumer internet company, indicating that users are excited about the offering.

Expedia Stayed Room Nights

In Q4 the company added 11.7 million nights booked, translating to a 18.6% growth year on year.

Key Takeaways from Expedia's Q4 Results

Sporting a market capitalization of $18.6 billion, more than $4.14 billion in cash and with positive free cash flow over the last twelve months, we're confident that Expedia has the resources it needs to pursue a high growth business strategy.

It was great to see that Expedia’s user base is growing. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that Expedia missed analysts' revenue expectations and the revenue growth was quite weak. Overall, this quarter's results were not the best we've seen from Expedia. The company is down 6.96% on the results and currently trades at $109.55 per share.

Expedia may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.