NASDAQ:EXPE is scheduled to announce their Q2 earnings report on July 30th, and investors are hopeful for some better news after the Covid-19 pandemic battered Expedia in the first quarter of 2020. While Wall Street estimated a loss per share of $1.23, Expedia reported a quarterly loss of $1.83 per share, a 33% drop from analysts early estimates. By the end of April, the stock price was down to $71 per share, a 36% drop from the beginning of 2020. Ahead of the second quarter report, Expedia's stock has rebounded on early optimism that the travel industry has finally seen some light at the end of the Covid-19 tunnel.
Currently, the stock price has climbed back to about $84 per share, up nearly 10% from a month ago. The Zacks Consensus estimate for second quarter revenue weighs in at just over $552 million, which would be a year over year decline of 82.5% from the second quarter of 2019. While these numbers seem daunting, we have seen investors be quite forgiving with poor quarterly results if there is renewed optimism in the company as the global economy gradually re-opens.
The end of the second quarter has marked a shift towards loosening restrictions on domestic travel and hospitality. A major improvement over the first quarter is the recovery in Expedia’s gross bookings year over year for the months of May and June. These could prove to be early tailwinds on the travel industry ramping up as some states and countries have offered citizens the ability to travel locally. This could also be customers anticipating an eventual global reopening in 2021, so they could be booking trips at reduced costs, knowing the risks of a potential second wave of the virus.
There are other indications that Expedia could be turning a corner as their marketing team has committed to strengthening their efforts during the second quarter, again in anticipation of the travel industry reopening sooner rather than later. While Expedia’s strategic investments in other sites such as Trivago, Hotels.com, and Orbitz have paid dividends in the past, the overall sluggishness of the industry could affect their overall performance for the quarter. The Expedia Cruiseline division has been stagnant for months now and may be acting as a drain on their profit margins. Though there is talk of cruises potentially being opened by the end of 2020, it still remains to be seen how many people will feel safe enough to board these ships despite any precautions the cruise companies may take.
Ultimately, the earnings report should paint the picture that most companies have had during the pandemic. While Q1 of 2020 was during the heart of Covid-19, Q2 should be an indication of how Expedia will perform coming out of the global shutdown. The travel industry has been one of the hardest hit sectors and truthfully may never be the same post pandemic. With optimism in many countries outside of the U.S., investors may want to jump in to investing with the travel industry leader, as domestic and global travel opens back up, especially at the current stock price which is 40% lower than the 52-week highs. Remember that Expedia is a massive company with $12 billion in revenue in 2019, and it is only a matter of when not if, the travel industry begins to return to its pre-pandemic ways.
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