Shares of Expedia (NASDAQ:EXPE) fell sharply today, after the online travel agency pulled its guidance Friday in response to the expanding coronavirus outbreak. The broader market plunge also weighed on the stock market, as the S&P 500 crashed 12% on fears around the pandemic, which has forced widespread closures of schools and businesses, and after the Federal Reserve's rate cut only seemed to rattle the market further.
Expedia, meanwhile, finished the session down 21.4%.
In its update, Expedia said it's withdrawing its guidance for the full year and expected first-year adjusted EBITDA guidance to be down $30 million to $40 million from its prior forecast, or $60 million to $80 million from a year ago as the company had already taken into account some coronavirus-related headwinds.
Expedia actually released the news Friday morning, but the market surged that day on hopes for a stimulus. Today, the news seemed to sink in with investors. The company also said it remains on track to achieve its run-rate cost savings of $300 million to $500 million for the year, but it's suspending share buybacks to "provide additional flexibility." That decision may signal fears about a cash crunch as Expedia absorbs the impact from the ongoing pandemic.
Expedia has a strong cash position, with over $3 billion on its balance sheet, but the company is likely to face significant revenue declines and possibly losses as demand for travel has fallen sharply during the outbreak. Normally, a company would choose to buy back stock at a time like this when shares have fallen more than 50%, but the management is instead being cautious.
Travel stocks are likely to be among the biggest victims of the outbreak as the travel and tourism industry is coming to a near-standstill in some places. Some airlines have scaled back on flights by as much as 40%.
The company's guidance now indicates that it expects Adjusted EBITDA between $96-$116 million for the first quarter, down about 40% from a year ago. If the outbreak persists, its financial performance is likely to get worse.