Expedia (EXPE) is scheduled to report Q208 results before the market opens today, July 31.
Based on our analysis, we at eChristianInvesting are expecting EXPE to report disappointing results that fail to meet Wall Street’s consensus expectations.
We are forecasting revenues of $785.6M versus analyst consensus of $793.6M. This would represent a 14% increase in revenues from last year’s $689.9M in the same period. Multiple sources have highlighted the American consumers' choice of foregoing vacations this summer due to high oil prices and the discouraging economic outlook. We believe that this behavior has begun to negatively affect Expedia’s business. That, along with increasing air fares and ridiculous (from the consumer’s viewpoint) baggage fees, will continue to weigh on the performance of their business in the next few months.
To date, Expedia’s shares have dropped over 40%. Meanwhile, the NASDAQ has only fallen 13%. Travel stocks in general have been down this year, however we still feel that Expedia is the solid #2 choice in this sector (behind Wall Street’s favorite: Priceline (PCLN)).
Shares are now trading at 11x consensus 2009 EPS estimates. This represents a significant discount to their peer group. While EXPE’s low valuation makes it appear attractive, we believe that the potential for disappointing quarterly results, along with the expected reduction in full year guidance, makes it risky to hold this stock right now.