Investing.com — The latest quarterly results and guidance from Expedia Inc (NASDAQ:) indicate ongoing slow growth that will limit its earnings potential in 2025, according to analysts at Deutsche Bank in a recent note.
While Expedia is expected to see some improvement in bookings, revenue growth, and margin leverage in 2025, it may not be enough to drive its stock price higher, the analysts noted. The company’s B2C business is facing challenges despite increased investments, which could impact its earnings growth in the coming years. As a result, Expedia has been downgraded to a Hold rating from Buy.
In Q3, Expedia’s bookings and adjusted EBITDA exceeded expectations, but revenue fell slightly short, with B2C revenue declining year-over-year. The company’s direct marketing expenses have also increased as it invests in Vrbo, HCOM, and international markets.
Although analysts anticipate modest improvements in bookings, revenue, and adjusted EBITDA, there are risks involved due to the company’s B2C business struggles and uncertainty around marketing effectiveness. Looking ahead to Q4, Expedia’s guidance is mixed, with bookings and revenue slightly surpassing estimates while adjusted EBITDA falls short.
Despite these challenges, analysts believe that Expedia’s current valuation presents a balanced risk/reward opportunity. They have raised the target price on the stock to $192 from $150 per share, considering the company’s discounted valuation compared to Booking Holdings Inc and its trading range over the past two years.