High Marketing Spend Could Weigh On Expedia’s Bottom-Line Despite Strong Gross Bookings

Similar to the last quarter, Expedia (NASDAQ: EXPE) is expected to report a solid financial performance for the second quarter on Thursday, July 26. The company’s top-line growth is likely to be driven by strong gross bookings during the quarter. However, the company’s ongoing investments on strategic initiatives and high selling and marketing expense could weigh on its bottom-line. Going forward, Expedia targets to double its gross bookings by the end of this year. Further, the company’s increased investments to cater to international markets should enable it to grow in the near term.

View our interactive dashboard for Expedia 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.

Key Trends To Watch For In 2Q’18 Results

• Similar to the previous quarter, HomeAway is likely to drive Expedia’s revenue growth for the second quarter. The segment is expected to benefit from the company’s ongoing efforts to ramp and optimize performance marketing, as well as an increase in conversion from continued improvements in customer and partner-facing experiences.
• The company’s gross bookings are expected to rise in the second quarter owing to bookings on websites such as Hotels.com, Hotwire, EAN, and Expedia. Further, the company’s acquisitions of Orbitz, Travelocity, and CarRentals, will augment its international expansion plans and boost its top-line.
• The company is expected to witness growth in new-client signings from Egencia, the company’s corporate travel arm, given its robust sales pipeline. However, Trivago, the company’s meta-search platform, will continue to be a drag on its top-line growth.
• Expedia’s operating expenses are likely to increase due to accelerated selling and marketing expense on Trivago, and HomeAway. This, coupled with the continued growth at Expedia Partner Solutions and increased head count, could cause its bottom-line to shrink. According to the company, its operating profits are likely to come in the second half of 2018.
• Despite a number of acquisitions in the recent past, Expedia is investing heavily on key strategic initiatives and continues look for new M&A opportunities.
• Given the headwinds from Trivago, Expedia expects its full year consolidated adjusted EBITDA to grow between 6% and 11%. Excluding cloud, its 2018 adjusted EBITDA is likely to grow in the range of 10%-15%.