On Friday, BofA Securities revised its stance on Expedia Group Inc. (NASDAQ:EXPE), downgrading the stock from Buy to Neutral and adjusting the price target to $156 from the previous $181. The decision came after the company's fourth-quarter bookings fell short of market expectations, coupled with concerns over its near-term growth prospects.
Expedia's fourth-quarter bookings totaled $21.7B, not meeting the anticipated $22.2B, with noted weaknesses in airline and Vrbo bookings. Although the company's revenue of $2.9B marginally exceeded forecasts due to a favorable lodging mix that led to higher take rates, and EBITDA of $532M also surpassed the expected $528M, the overall performance raised some eyebrows. Lower cost of sales helped in achieving the slight EBITDA beat.
Management's guidance for first-quarter bookings growth was set at low to mid-single digits, which is below the 7% growth projected by analysts. The cautious outlook is attributed to tougher year-over-year comparisons, ongoing pressure on air bookings, and a slower than anticipated recovery for Vrbo following its platform re-launch.
For the full year 2024, Expedia's management predicts top-line growth to be in line with 2023, ranging between 9-10% year-over-year, and anticipates a similar EBITDA margin growth of approximately 75 basis points. However, first-quarter bookings are growing at a pace below the company's full-year growth outlook, which contrasts with the previous year when first-quarter bookings outpaced.
BofA Securities highlighted several factors that may hinder Expedia's stock performance relative to its peers. These include expectations for a more back-end loaded year in terms of top-line growth, a prolonged recovery for Vrbo, increased marketing expenditures in international markets where competition is fierce, the upcoming retirement of the CEO in May 2024, and predicted expenses of $80-100 million for cost streamlining efforts that could potentially disrupt operations.
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