On Monday, Wells Fargo (NYSE:WFC) adjusted its outlook on Expedia Group Inc. (NASDAQ:EXPE), reducing the price target to $149 from a previous $155, while sustaining an Equal Weight rating on the stock. The revision reflects a conservative stance due to a forecasted decline in gross bookings and weaker trends in traffic and Average Daily Rate (ADR) as the first quarter comes to a close.
The firm has kept its first-quarter 2024 estimates for Expedia unchanged but has lowered its second-quarter and full-year 2024 gross bookings predictions by 2% and 1%, respectively. This adjustment is attributed to the observed weakening in traffic and ADR trends.
Consequently, the firm's second-quarter and full-year 2024 EBITDA estimates have been decreased by 3% and 4%, respectively. The reduction in EBITDA expectations is partially mitigated by anticipated lower sales and marketing (S&M) expenses.
Wells Fargo's revised price target of $149 is based on a valuation that implies a multiple of 9.0 times the firm's estimated 2025 EBITDA of $3.2 billion for Expedia. Despite the reduction in the price target, the firm maintains its Equal Weight rating, indicating a neutral view of the stock's current valuation.
The analyst from Wells Fargo expressed caution heading into Expedia's first-quarter earnings report, suggesting that the travel company's near-term prospects may be under pressure due to the softer booking trends.
InvestingPro Insights
As investors consider the cautious outlook presented by Wells Fargo on Expedia Group Inc. (NASDAQ:EXPE), real-time data from InvestingPro provides a broader perspective on the company's current financial health. Expedia's market capitalization stands at a robust $18.77 billion, and the company has shown an impressive gross profit margin of 87.75% over the last twelve months as of Q4 2023. Despite the concerns over near-term booking trends, Expedia's revenue growth has remained positive, with a 10.05% increase in the last twelve months and a quarterly growth rate of 10.28% in Q4 2023.
InvestingPro Tips highlight that Expedia's management has been actively repurchasing shares, which could be a sign of confidence in the company's future. Additionally, the company trades at a low P/E ratio relative to near-term earnings growth, with an adjusted P/E ratio of 16.62 as of Q4 2023. This could indicate that the stock is undervalued given its earnings potential. It's worth noting that Expedia does not pay a dividend, focusing instead on reinvesting earnings back into the company's growth.
For investors looking for a more comprehensive analysis, there are over 10 additional InvestingPro Tips available, which can be accessed through: https://www.investing.com/pro/EXPE. These tips provide a deeper dive into Expedia's financials and market performance, including insights into the company's debt levels and stock price volatility. To enhance your investment research on Expedia, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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