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Why Expedia Group Stock Popped 12% on Wednesday

By Travis Hoium – Apr 22, 2020 at 2:46PM

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A $1 billion investment rumor sent the online travel specialist's stock up.

What happened 

Shares of Expedia Group (EXPE -0.55%) jumped as much as 12% on Wednesday after rumors spread that the online travel specialist could receive a $1 billion investment. As of 2:40 p.m. EDT, the stock was up 7.6%. 

So what

The Wall Street Journal is reporting that Expedia is in talks with private equity firms Silver Lake and Apollo Global Management regarding a $1 billion investment. Terms of a potential deal aren't yet known, but liquidity to get through the current downturn in travel and consumer discretionary spending would be welcome news for Expedia. 

Black and white picture of an airplane from underneath while on the ground.

Image source: Getty Images.

Travel companies are really just trying to raise enough money to survive right now, and that's what this investment could be. I think the travel industry will recover eventually, but the cash needed to get through the COVID-19 crisis is what's top of mind for investors. 

Now what

This is a bullish sign for Expedia long-term if financing does come through. The company was solidly profitable in 2019, with $565 million in net income, and its current $8.6 billion market cap puts it at a P/E of about 15. That figure will likely get worse if equity or warrants are part of a capital raise, but I still think owning shares of one of the top online travel companies coming out of this crisis will be a smart bet for long-term investors.

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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