On Monday (NASDAQ:MNDY), Mizuho (NYSE:MFG) Securities adjusted its outlook on Expedia Group Inc. (NASDAQ:EXPE) shares, increasing the price target from $135.00 to $165.00 while maintaining a Neutral rating on the stock. The revision comes after Expedia's recent performance indicated a strong execution of strategies by the new CEO.
Expedia's latest quarterly results revealed that the company's room night growth surpassed expectations. Additionally, the travel platform raised its bookings and EBITDA guidance for the fiscal year 2024. This positive momentum has been partly attributed to the traction gained by Expedia's One-Key initiative. The vacation rental platform Vrbo has returned to positive growth, and hotels.com has managed to maintain stability.
Mizuho's confidence in Expedia's future earnings before interest, taxes, depreciation, and amortization (EBITDA) has been bolstered by these developments. The firm now anticipates an EBITDA of $3.5 billion for the fiscal year 2026. The new price target is based on a 9x multiple of the projected FY26 EBITDA, which aligns more closely with the multiples of Expedia's travel industry peers.
The analyst from Mizuho highlighted that while the current outlook for Expedia is positive, a move to a more constructive stance on the stock would require the One-Key initiative to drive sustainable double-digit growth. This statement underscores the importance of the One-Key initiative's performance in shaping Expedia's future valuation and market position.
In other recent news, Expedia Group, Inc. has announced its Q3 2024 financial results, noting a 3% increase in revenue to $4.1 billion and a 7% rise in gross bookings to $27.5 billion, despite facing macroeconomic challenges.
The company's disciplined cost management led to a decrease in overhead expenses by 3% and a 6% reduction in cost of sales. Leadership changes were also announced, with CFO Julie Whalen stepping down and Ramana Thumu stepping in as Chief Technology Officer.
In addition, Expedia raised its full-year guidance indicating confidence in its strategic execution and ongoing demand. The company's EBITDA rose to $1.25 billion, a 3% increase from the previous year, with a margin of 30.8%. The company also continues its share repurchase program, with $3.2 billion remaining.
These are recent developments that show Expedia Group's resilience amid macroeconomic turbulence. The firm is focusing on operational efficiencies and is optimistic about long-term growth opportunities. It is worth noting that the company is enhancing its AI technology to improve customer service and conversion rates and is making efforts to regain international market share.
InvestingPro Insights
Recent data from InvestingPro adds depth to Mizuho's analysis of Expedia Group Inc. (NASDAQ:EXPE). The company's market capitalization stands at $23.2 billion, reflecting its significant presence in the travel industry. Expedia's impressive gross profit margin of 89.19% for the last twelve months as of Q3 2023 aligns with one of the InvestingPro Tips highlighting the company's "impressive gross profit margins." This robust profitability metric supports Mizuho's positive outlook on the company's EBITDA projections.
The stock's recent performance has been noteworthy, with InvestingPro data showing a 60.19% price total return over the past six months. This aligns with another InvestingPro Tip indicating a "significant return over the last week" and "strong return over the last three months," suggesting that the market is responding positively to Expedia's strategic initiatives and improved performance under the new CEO.
However, investors should note that the stock's P/E ratio (adjusted) of 20.28 and its high Price / Book multiple of 17.55 indicate that the market has already priced in much of the company's recent success. This valuation context is crucial when considering Mizuho's new price target and maintaining a Neutral rating.
For readers interested in a more comprehensive analysis, InvestingPro offers 16 additional tips on Expedia, providing a deeper understanding of the company's financial health and market position.
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