Online travel agency Expedia (NASDAQ:EXPE) reported Q3 FY2023 results topping analysts' expectations, with revenue up 8.57% year on year to $3.93 billion. Turning to EPS, Expedia made a non-GAAP profit of $5.41 per share, improving from its profit of $2.98 per share in the same quarter last year.
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Expedia (EXPE) Q3 FY2023 Highlights:
- Revenue: $3.93 billion vs analyst estimates of $3.86 billion (1.87% beat)
- EPS (non-GAAP): $5.41 vs analyst estimates of $5 (8.23% beat)
- Free Cash Flow was -$1.59 billion, down from $923 million in the previous quarter
- Gross Margin (GAAP): 89.5%, up from 87.4% in the same quarter last year
- Booked Room Nights: 89.3 million, up 7.7 million year on year
Originally founded as a part of Microsoft (NASDAQ:MSFT), Expedia (NASDAQ:EXPE) is one of the world’s leading online travel agencies.
Online TravelBecause 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 GrowthExpedia's revenue growth over the last three years has been exceptional, averaging 50.7% annually. This quarter, Expedia beat analysts' estimates but reported mediocre 8.57% year-on-year revenue growth.
Ahead of the earnings results, analysts covering the company were projecting sales to grow 8.99% over the next 12 months.
Usage Growth As an online travel company, Expedia generates revenue growth by increasing both the number of stays (or experiences) booked and the commission charged on those bookings.
Over the last two years, Expedia's nights booked, a key performance metric for the company, grew 21.1% annually to 89.3 million. This is strong growth for a consumer internet company.
In Q3, Expedia added 7.7 million nights booked, translating into 9.44% year-on-year growth.
Key Takeaways from Expedia's Q3 Results Sporting a market capitalization of $13.4 billion, more than $6.49 billion in cash on hand, and positive free cash flow over the last 12 months, we believe that Expedia is attractively positioned to invest in growth.
It was good to see Expedia narrowly top analysts' revenue expectations this quarter, 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 and it completed the final phase of its Vrbo unit's integration. Zooming out, we think this was a decent quarter, showing that the company is staying on track. Investors are likely happy the company's integration efforts are largely completed, and the stock is up 10.2% after reporting. It currently trades at $104.5 per share.
The author has no position in any of the stocks mentioned in this report.