What happened
Expedia (EXPE 0.33%) shareholders lost ground to a declining market this week. Shares fell 16% through Thursday trading compared to a 6% slump in the S&P 500, according to data provided by S&P Global Market Intelligence. The drop added to significant losses for the travel booking specialist, whose shares are down over 45% so far in 2022.
It was powered by rising investor concerns about the scale of a potential pullback in consumer spending on the way.
So what
Expedia's most recent earnings update didn't inspire much confidence from investors. Gross bookings were down 10% in the month of April, management said in May, as inflation and slowing economic growth delayed the vacation travel rebound that many investors were hoping to see.
The stock's decline this week reflects Wall Street's fear that these issues will impact the key summer season and threaten Expedia's wider 2022 and 2023 fiscal years. The stock received downgrades this week for those reasons, in fact. Analysts at Citi lowered their short-term targets for Expedia shares while citing uncertainty about leisure travel booking demand in late 2022 and beyond.
Now what
Expedia's exposure to the vacation travel industry makes it highly sensitive to changes in economic growth rates. That sensitivity should support solid sales in the summer quarter, even though consumers are dealing with historically high prices on things like airfare and fuel.
The big question today is whether that seasonal demand spike will give way to another painful period of weak demand for hotels, flights, and rental cars ahead. There's no way to know for sure which growth scenario will unfold over the next few months and quarters. And that uncertainty is convincing investors to move away from consumer discretionary stocks like Expedia today.
But more clarity is on the way. Expedia will issue its second-quarter earnings results in early August. That report will likely include monthly sales data through July, giving investors a good picture of demand trends heading into the second half of 2022.
