After A Strong Start To The Year, What We Expect From Expedia In 2018
Expedia (NASDAQ: EXPE) reported strong Q1 earnings recently to start the year on a positive note. In terms of its quarterly performance, the company performed well, as expected. The company’s revenues grew by 15% to $2.51 billion for the first quarter. We have a price estimate of $144 for Expedia’s stock which is 20% above its current price. With travel bookings continuing to shift from offline to online, the company’s strong position in terms of global gross bookings, a target of doubling its gross booking in 2018 in comparison to the previous year, and increased investments to cater to international markets should help it continue its strong growth in the near term.
Expedia generated $2.5 billion in revenues for Q1, and we expect its revenues to be around $11.6 billion in 2018. We have created an interactive dashboard which shows our forecasts for the company’s revenues. You can modify the different revenue drivers to see how changes impact the company’s expected revenues and stock price.
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Expedia generates revenue from four segments – Online Travel Agencies (OTA) revenue, HomeAway revenue, Egencia revenue, and Trivago revenue. For Q1, the company generated $21.2 billion in OTA gross bookings, and we expect it to grow to $79.9 billion by the end of the year. The company has witnessed increased gross bookings over the past couple of years owing to bookings on websites such as Hotels.com, Hotwire, EAN, and Expedia, as well as the company’s acquisitions such as Orbitz, Travelocity, and CarRentals, which have furthered its international expansion. Despite a slight decline in average daily rates, significant growth across the night rooms booked led to increased revenue from lodging. Even air ticket revenues grew amid increased bookings. With a take rate of around 11%, which is similar to the figure for the past few years, we estimate OTA revenue to generate $8.8 billion in 2018.
The company generated $582 million in revenue from other segments, including HomeAway, Egencia, and Trivago, and we expect it to generate $2.8 billion in 2018. HomeAway, which was acquired by the company in December 2015, has seen over 46% growth in gross bookings in 2017 with over 500,000 of its properties listed on Expedia’s platforms. We anticipate steady growth in the near term, with increased property listings. We forecast Egencia, the company’s corporate travel arm, to grow at around its historical pace. Lastly, Trivago – the company’s meta-search platform – has grown phenomenally over the years, thus justifying increased investment in the business.