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Why Expedia Stock Gained 22% in 2020

By Demitri Kalogeropoulos - Jan 5, 2021 at 9:08AM

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Investors focused on the upcoming rebound in travel services.

What happened

Shareholders of Expedia Group ( EXPE 0.30% ) managed positive returns through a volatile market last year. The stock gained 22% in 2020 compared to a 16% rise in the S&P 500, according to data provided by S&P Global Market Intelligence.

Shares of the travel booking giant had been down by over 50% at one point in the year, but they recovered all of that lost ground as investors began looking past the COVID-19 pandemic.

A couple on vacation.

Image source: Getty Images.

So what

Expedia shares were among the hardest hit during the sell-off that struck Wall Street in March. The company's focus on the travel industry exposed it to a potentially massive revenue slump through the pandemic. In fact, sales did fall by over 80% as travel and vacation volumes plummeted. It was forced to take on more debt as cash flow turned sharply negative.

Operating trends have steadily improved since April, though, and Expedia in early November reported encouraging rebounds in hotel and travel bookings. Sales declines landed at 58% in the fiscal third quarter compared to an 82% drop in the previous quarter.

Now what

Investors predicting a quick rebound should approach the stock with plenty of caution. Air travel and vacation trends likely won't fully recover until the COVID-19 threat has passed. Thus, while Expedia might show improving sales and profit trends over the next few quarters, it might be a year or longer before it begins setting new operating records.

Still, some investors might prefer owning this tech specialist, or peers like TripAdvisor, over airline stocks, which are burdened with much higher fixed costs.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Expedia, Inc. Stock Quote
Expedia, Inc.
EXPE
$166.57 (0.30%) $0.50
TripAdvisor, Inc. Stock Quote
TripAdvisor, Inc.
TRIP
$26.88 (-0.26%) $0.07

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

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