What Happened:
Shares of online travel agency Expedia (NASDAQ:EXPE) jumped 8.5% in the morning session after the company reported third quarter results that narrowly topped analysts' revenue expectations, driven by strong performance in its B2B division. We were also glad it expanded its user base and beat Wall Street's EPS and adjusted EBITDA estimates. Management's commentary around the business this quarter was positive: its new One Key initiative, which unifies the company's different brands into one loyalty program, is showing traction. This program could result in a stickier customer and more predictable revenue, two things that the market generally cheers. The company also completed the final phase of its Vrbo unit's integration. Zooming out, we think this was a very solid quarter, showing that the company is staying on track.
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What is the market telling us:
Expedia's shares are quite volatile and over the last year have had 7 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was three months ago, when the stock dropped 11% on the news that the company reported second quarter results that narrowly missed analysts' revenue expectations. Gross bookings missed as well. On an absolute basis, revenue growth was muted. On the other hand, it was good to see Expedia grow Booked Room Nights. As for full year guidance, the company maintained the previous outlook of double-digit top line growth with margin expansion, which isn't too specific but does describe what Wall Street analysts expect. Overall, it was a mediocre quarter for Expedia, and with high expectations about the strength of travel, these results weren't enough.
Expedia is up 26.3% since the beginning of the year, but at $110.76 per share it is still trading 9.61% below its 52-week high of $122.53 from July 2023. Investors who bought $1,000 worth of Expedia's shares 5 years ago would now be looking at an investment worth $873.
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