Please ensure Javascript is enabled for purposes of website accessibility

Why Expedia Shares Gained 21% Last Month

By Jeremy Bowman - Sep 8, 2020 at 5:33PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the online travel agency gained on hopes for a recovery.

What happened

Shares of Expedia (EXPE 0.81%) were moving higher last month as the online travel agency got a boost from an analyst upgrade, a falling coronavirus case count, progress on the vaccine front, and data showing the economy continuing to recover.

According to data from S&P Global Market Intelligence, the stock finished the month up 21%.

As you can see from the chart below, the stock climbed steadily over the course of August.

EXPE Chart

EXPE data by YCharts

So what

Expedia shares slipped at the end of July after the company issued a dismal second-quarter earnings report. Though revenue plunged 82% during the lockdown-impacted quarter, and the company posted an adjusted net loss of $577 million, investors were willing to look past those figures as Expedia was one of several travel stocks, including Booking Holdings and TripAdvisor, that rose by double-digits during August.

A woman in an airport watching a plane take off.

Image source: Getty Images.

In fact, on August 3, Expedia got an upgrade from BTIG to buy from neutral, as analyst Jake Fuller said the post-earnings sell-off was unwarranted since the company took no impairments and is still on track to make a recovery. He also noted tailwinds from earlier cost cuts and said the stock's valuation was compelling, as it trades at 7 times his estimates for 2022 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA.)  

Expedia shares seemed to gain as coronavirus cases fell from the July peak, lifting the hopes for a recovery in the travel sector, and as the labor department reported 1.7 million new jobs added in July, adding to bullishness on the recovery. Towards the end of the month, FDA approval of a $5, 15-minute test from Abbott Labs helped lift travel and discretionary stocks.

Now what

Surprisingly, Expedia shares are only down 8% year to date despite its business having imploded during the pandemic. Unlike travel companies with high fixed costs, such as airlines and hotels, Expedia's biggest expense line item is advertising, which can easily be scaled up and down, giving the company flexibility that other travel businesses don't have.

Still, Expedia will be at the mercy of the pandemic for the foreseeable future, so investors should keep their eye on COVID-19 case counts and vaccine prospects for insight into the company's future.


Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Booking Holdings and TripAdvisor. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Expedia, Inc. Stock Quote
Expedia, Inc.
$110.11 (0.81%) $0.88
TripAdvisor, Inc. Stock Quote
TripAdvisor, Inc.
$26.05 (-0.08%) $0.02
Abbott Laboratories Stock Quote
Abbott Laboratories
$110.52 (0.23%) $0.25
Booking Holdings Stock Quote
Booking Holdings
$2,063.76 (1.98%) $40.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/11/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.