Expedia Group (EXPE) – A Bull Case Thesis

We noticed a bullish thesis on Expedia Group (EXPE) on ValueInvestorsClub by BenHillGriffin. VIC is our preferred site because the ideas there are generally posted by aspiring analysts who produce in-depth research. We find the ideas presented on the site well thought out and worthy of a serious look. Click here for the full article. Below we summarized the EXPE bullish thesis:

The Redmond, Washington-based Expedia Group, Inc. is an online travel shopping company for consumer and small business travel. Its websites, which are primarily travel fare aggregators and travel metasearch engines, include Expedia.com, Vrbo, Hotels.com, Hotwire.com, Orbitz, Travelocity, trivago and CarRentals.com. With a 25,000-strong workforce, EXPE is the second largest online travel company after Booking Holdings, Inc.

EXPE’s business is one of the primary victims this pandemic has preyed upon. A blurred vision of the timing and scale of recovery from the COVID19 impact has created a gulf of faith among consumers and investors alike.

The analyst expects a spectacular recovery from the pandemic, and regards EXPE as one of the prime beneficiaries from the pent-up demand that will follow the re-opening of trade, travel and tourism. EXPE is one of those assets that have quite a few hidden values yet to be unlocked. The fact the EXPE is trading at higher than pre-COVID level is testament to its inherent strength. The enterprise value is higher than the current market price too.

A rigid cost restructuring program in progress under the new CEO was accelerated during the COVID-period, and should yield significant operating leverage with resultant meaningfully better than consensus EBITDA. Asset monetization, especially Vrbo, optimization of the B2B business, and clever execution of cost-saving plans should help EXPE achieve the desired objectives.

The analyst was very bullish and gave the following three scenarios:

  1. Bear case with 10x multiples on $2.2 billion EBITDA = 20-30% downside.
  2. Base case with 10x multiples on $3.7 billion EBITDA = 45-60% upside.
  3. Bull case with 11x multiples on $4.1 billion EBITDA = 80-100% upside.

Footnote: Since the appearance of the original blog on 26 January, 2021, EXPE stock has risen from $131 to around $170.