By Sam Boughedda
According to BofA analysts, Expedia (NASDAQ:EXPE) is an undervalued asset, with sentiment "going in the wrong direction."
The analysts reiterated a Buy rating and $150 price target on the stock in a note Tuesday, helping to boost the shares, which are up more than 2.5% at the time of writing and almost 8% in 2023, with many travel-related stocks benefitting from continued robust demand in the sector.
"Expedia has underperformed both YTD and TTM at 7% and -50% vs Booking (NASDAQ:BKNG) at 33% and 22%, respectively," noted the analysts.
BofA believes that due to the stock's recent performance, management could be under increasing pressure to deliver better stock performance. The analysts added that the relatively new CFO has an "opportunity for positive change incl: 1) more clarity on app user CAC and LTV to justify marketing spend (or a strategy change), 2) better guidance practices that lower quarterly disconnects between Expedia's and Street ests for bookings & margins, 3) greater clarity on VRBO performance vs peers, 4) greater clarity on '22/23 re-platforming impact on bookings, and 5) buybacks to reduce share count."
Furthermore, they also said Vrbo and the company's FCF seem undervalued in its stock price.
They concluded that while Expedia's room night and marketing spend outlook has added near-term market share and earnings uncertainty, and there is potential for a travel slowdown in a recession, app downloads have been strong, AirDNA data suggests that VRBO is performing well, the valuation is attractive across several metrics, and the firm believes better disclosure could drive multiple expansion.