What Has Been The Immediate Impact Of The Brexit Decision On The Online Travel Companies?
- Stock Price Declines
Since June 23rd, stocks of all the major online travel agencies (OTAs) have declined significantly. TripAdvisor and Expedia stocks have both dipped by almost 10%, whereas Priceline stock had fallen by ~14%. The main reason for this sudden dampening of travel stock prices is the Brexit or UK’s decision to move out from the European Union, which was taken on June 23rd. All of the three OTAs are dependent on Europe to a great extent. Almost 50% of Priceline’s revenues, 25% of Expedia’s, and 30% of TripAdvisor’s revenues come from Europe. Hence, the changes in relationships within the European nations are expected to impact exchange rates and travel policies. However, the stock market is driven by human sentiments to a large extent. Hence, that might be the case for this potential overreaction in the decline in the stock prices of the OTAs because it is not until two years that the UK can leave the EU. The rules and policies among the European nations will remain the same till then. Thus, there might not be a significant real impact in the short-run on the online travel demand, on account of Brexit. In fact, some may decide that this might be a good time to buy a few of these undervalued OTA stocks. Given below are our 2016 Revenue and EBITDA growth expectations for the top 3 online travel companies.
- Cheaper British Pounds
The British Pound depreciated by almost 11% against the Euro on June 24th, the day after the Brexit announcement. If the British Pound’s decline continues then the UK might become a cheaper destination for international travel. On the other hand, local travelers from the UK might be at a disadvantage due to their devalued currency, when they consider international travel. This might translate to a decline in outbound travel from the UK, however, the inbound travel to the UK might rise. Hence, the overall impact from a change in currency exchange rates is yet to be determined.
Have more questions on Priceline and Expedia? See the links below.
- What Is Priceline’s Fundamental Value On The Basis Of Its Forecasted 2015 Results?
- How Has Priceline’s Revenue And EBITDA Composition Changed Over 2012-2016E?
- What Is Priceline’s Revenue And EBITDA Breakdown?
- Top 3 U.S. OTAs: A Comparison Of Operating Margins
- How Has Priceline’s Stock Performed In The Last Five Years?
- What Drove Priceline’s Revenue And EBITDA Growth Over The Last Five Years?
- Where Can Priceline’s Growth Come From In The Next 5 Years?
- What Is Priceline’s Fundamental Value Based On 2016 Estimated Numbers?
- What Is Expedia’s Fundamental Value On The Basis Of Its Forecasted 2015 Results?
- Top 3 U.S. OTAs: A Comparison Of Operating Margins
- Expedia Year 2015 Review
- Why Might TripAdvisor Be An Attractive Acquisition Target For Priceline?
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Priceline
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