Expedia (NASDAQ:EXPE) stock plunged to its lowest levels since 2013 during the COVID-19 crash in March 2020 as travel restrictions cast a dark cloud over the online travel agency's future.

However, the stock subsequently recovered and has tripled to an all-time high over the past 12 months as investors have focused on reopening plays and pent-up demand for travel and leisure activities. Does it still make sense to buy Expedia now, or are investors counting their eggs before they hatch?

A woman looks out the window at an airport.

Image source: Getty Images.

How badly did the pandemic hurt Expedia?

Expedia's massive network includes its namesake site, Hotels.com, Travelocity, Orbitz, Trivago, Hotwire, Vrbo, Egencia, HomeAway, Traveldoo, Classic Vacations, VacationRentals.com, CarRentals.com, Wotif, CheapTickets, and ebookers.

Its top competitor is Booking Holdings (NASDAQ:BKNG), which owns Booking.com, Priceline.com, Agoda.com, Kayak.com, Cheapflights, Rentalcars.com, Momondo, and OpenTable. The two companies hold a near-duopoly in the online travel agency market.

Expedia's growth in room nights, gross bookings, and revenue dropped off a cliff last year as global travel and tourism ground to a halt:

Year-Over-Year Growth

2018

2019

2020

Room Nights

13%

11%

(55%)

Gross Bookings

13%

8%

(66%)

Revenue

12%

8%

(57%)

Data source: Expedia.

Expedia's bottom line was also flooded with red ink in 2020. It posted a net loss of $2.69 billion, compared to a profit of $565 million the previous year. On an adjusted EBITDA basis, it still posted a net loss of $368 million, reversing a profit of $2.13 billion in 2019.

During the company's last earnings call, CFO Eric Hart said that while the company remained "optimistic about the vaccines," the overall "visibility on what the recovery will look like and near-term trends remain low at this point."

Hart didn't provide any exact revenue guidance for 2021 but said "efficiency initiatives" it executed throughout the pandemic would enable Expedia to "emerge from the disruption leaner, faster, and with improved margins."

Those initiatives include improving the economics of the virtual cards it uses for merchant payments, handling customer calls through self-service and virtual agents to cut costs, and optimizing its marketing expenses. It also reduced its headcount and consolidated all of its brands under a single cloud architecture.

Based on these developments, analysts expect Expedia's revenue to rise 46% this year with a narrower loss as well. Next year, they expect revenue to increase another 38% as the company returns to profitability.

But are analysts too optimistic?

Expedia stock seems reasonably valued at about 30 times 2022 earnings estimates and three times this year's sales, but investors should take Wall Street's forecasts with a grain of salt.

Masked passengers on a flight.

Image source: Getty Images.

We can't be sure when the pandemic will actually end, and rising infection rates in several countries, new coronavirus strains, and problems with vaccines could all curb the travel sector's recovery. Newly proposed rules, such as a "vaccine passport" for travel, could further limit non-essential trips, while the shift to remote work could remain permanent for many workers.

Expedia and Booking both face intense competition from Airbnb, which went public last December. Expedia is trying to counter Airbnb with similar platforms like Vrbo and HomeAway, but the ongoing battle could force Expedia to dial up its marketing expenses again. Booking's integration of short-term rentals into Booking.com and Agoda would only exacerbate that pressure.

Expedia's long-term debt also surged to $8.22 billion at the end of 2020, nearly doubling the count from year-end 2019. None of that debt matures within the year, and Expedia still has $3.36 billion in cash and a $2 billion revolving line of credit -- but reducing that mountain of debt will rely heavily on the company's post-pandemic recovery.

Is Expedia worth buying right now?

If you're optimistic that the pandemic will end soon, and global travel will bounce back quickly thanks to pent-up demand, Expedia might be worth buying right now. But if you see a bumpy recovery ahead with limited non-essential travel and tougher competition, it's smarter to stick with other evergreen growth stocks instead.

Call me a pessimist, but I think the latter scenario is more likely. Buying Expedia stock when it crashed last year was a smart move, but chasing it at these all-time highs before the crisis is actually over is simply too risky.

 
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.