21 May 2020

Expedia Shares Journey North Despite Q1 Miss

Tags

News shaping
the markets today

     

What’s happening: Shares of Expedia Group gained in extended trading on Wednesday, despite the Seattle, Washington-based company reporting a wider-than-expected loss for its first quarter.

What happened: The travel industry is among the worst hit by the coronavirus pandemic and could make a slow recovery, as travel restrictions could continue even after the gradual reopening of economies and people refraining from planning vacations or business trips.

Expedia joined its online travel booking peers to record a jaw-dropping decline in overall business from the time the covid-19 outbreak started. The company’s total gross bookings tumbled around 90% during the second half of March, when the virus started spreading in the US.

Despite the murky prospects, the company’s CEO Peter Kern commented on positive momentum in the current quarter, with one of the segments of the business witnessing a stronger rebound.

How were the results: The travel company reported a wider loss for the latest quarter, while revenue declined:

  • Expedia posted a wider quarterly loss of $1.3 billion, or $9.24 per share, versus a loss of $103 million, or $0.69 per share, in the same quarter last year.
  • Revenue slipped to $2.21 billion in the first quarter, from $2.26 billion in the year-ago quarter, and missed the consensus estimate of $2.29 billion.
  • Adjusted loss for the quarter came in at $1.83 per share, much wider than the consensus view for a loss of $1.04 per share.

Why it matters: As the coronavirus pandemic started to spread, Expedia witnessed a huge spike in cancellations. Cancellation inquiries for air bookings climbed to over 95% in April, versus 65% in February.

Expedia withdrew its full-year guidance in March, as travel restrictions started to affect operations. The company cut 3,000 jobs in February in a bid to save costs. Expedia also raised $3.2 billion to preserve liquidity during the coronavirus crisis.

CEO Peter Kern said that cancellations had stabilized, with some growth returning in May as certain countries emerge from lockdowns. People are already thinking about their summer vacations, coming off a tough phase. In fact, the company’s vacation rental business, Vrbo, is witnessing a strong improvement.

Expedia’s CEO said in a statement, “Fortunately, we were ahead of the game having implemented cost savings measures earlier this year, and with the added pressure from covid-19 we accelerated and expanded our ambition on improving our long-term cost structure.”

How the shares responded: Shares of Expedia rose 4.2% during the regular session on Wednesday and rose by another 4.4% in after-hours trading. The stock has suffered hugely over the past three months, plummeting 35%. However, it has made strong recovery lately, rising 33% over the past month.

What to watch: With the company achieving some growth in its business in the current quarter, investors will be expecting more news around a recovery in bookings. Since growth is likely to be slow, any updates on bookings and Expedia’s liquidity situation can offer support to the stock.

The Markets Today

     

Investors will be keeping an eye on European stocks, ahead of PMI reports from the region.

Context: European stocks ended higher on Wednesday as investors assessed earnings reports from various companies. Investors were also keeping an eye on any news related to the development of a vaccine for the coronavirus pandemic.

Details: Various countries around the world are gradually easing lockdown restrictions to get their economies back on the growth track after months of shutdowns.

Meanwhile, markets were monitoring news of a vaccine for covid-19. Moderna provided some hopes with its experimental drug for the pandemic, but various vaccine experts later pointed out to the lack of information from the pharma company for this vaccine.

On the economic data front, the Office for National Statistics reported that the UK’s consumer price index had declined 0.8% in April. Eurozone inflation fell to 0.3% in April, versus an initial estimate of 0.4%, the region’s statistics agency Eurostat reported yesterday.

In corporate news, shares of Experian gained more than 7% after the credit bureau reported strong full-year results. Telecom Italia bucked the market trend, declining around 8%, after the company reported downbeat revenue for the first quarter.

What to watch: Markets await the PMI report from the Eurozone. The IHS Markit Eurozone manufacturing PMI, which fell to 33.4 in April, is expected to rebound to 38 in May. Analysts also expect the services index to surge to 25 in May, from a reading of 12 in April. The composite PMI is projected to climb to 25 in May, from an earlier reading of 13.6.

Investors will be monitoring the daily coronavirus cases, with the number of infections globally surging to reach 4,996,470. Britain has confirmed over 249,610 covid-19 cases, while there are around 232,550 cases in Spain.

Other Markets: US indices closed higher on Wednesday, with the Dow, S&P 500 and Nasdaq 100 up by 1.52%, 1.67% and 2.08%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Manufacturing, services and composite PMI reports from France, Germany and the UK, South Africa’s value of building plans passed and interest rate decision, Turkey’s interest rate decision, Canada’s new housing price index and ADP employment change, Russia’s industrial production, Brazil’s Federal tax revenues, Argentina’s consumer confidence as well as the US initial jobless claims, Philadelphia Fed manufacturing index, PMI data, existing home sales, CB leading index and natural gas stocks change.

ADS Securities London Limited “ADSS” is an execution-only service provider. This material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or investment objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by ADSS that any particular investment, security, transaction or investment strategy is suitable for any specific person. To the extent that any content in this material is construed as investment research, you must note and accept that the content was not prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.  This material may contain links to third party websites, and any content, or use of your personal data by any third party websites is not the responsibility of ADSS or any member of the ADSS Group.