Expedia Heads Into Dangerous Winter

Expedia Group Inc. (EXPE) reports Q3 2020 earnings after Wednesday’s U.S. closing bell, with analysts expecting the battered travel giant to post a loss of $0.79 per-share on just $1.35 billion in revenue. The company earned $3.38 per-share during the same quarter in 2019, highlighting an historic fall from grace as a result of the COVID-19 pandemic. The stock recovered from a one-day selloff after missing Q2 top and bottom line estimates by wide margins in July and has now settled into a holding pattern under long-term resistance.

New Lockdowns Undermine Expedia Recovery

One million airline passengers crossed U.S. Transportation Security Administration (TSA) checkpoints on Oct. 18, the highest number since March, in reaction to growing optimism. However, surging infections in Europe and the United States have undermined short-term sentiment, with new lockdowns and rapidly dwindling hospital beds. Many experts now predict this wave will be worse than the first, putting pressure on Expedia and other travel stocks.

RBC analyst Mark Mahaney warned about “rising competitive risk” in a recent survey, finding “several negative read-throughs” specific to the company. For starters, Expedia is losing market share to rivals Airbnb and Google, relinquishing its position as the #1 most popular destination for planning travel in the U.S., in results dating back to 2015. Worse yet, it’s also fallen from a 190%/107% selection as a travel planning/booking site in 2016 to just 128%/76% in 2020.

Wall Street And Technical Outlook

Wall Street consensus is mixed, which looks appropriate given the uncertain travel environment into 2021. It’s currently rated as a ‘Moderate Buy’ based upon 5 ‘Buy’ and 6 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines, despite the surge in lockdowns. Price targets currently range from a low of $85 to a Street-high $143 while the stock closed last week about $12 below the median $107 target.

Expedia entered a bear market long before the pandemic struck in the first quarter, posting an all-time high near 160 in July 2017 and reversing into a decline that broke support at the 200-day moving average in November 2019. The stock fell to an 8-year low in March and bounced into September, stalling around the 100 level. This price action looks like a classic pullback to new resistance, raising odds for a rollover and test of the deep March low.

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