What happened

Shares of Expedia (EXPE 2.31%) finished higher today after the online travel agency beat revenue estimates in its third-quarter earnings report and gave positive commentary on trends going forward.

The stock gained 5.7% on the news.

So what

Expedia, which owns travel brands including Orbtiz, VRBO, and Travelocity, posted record revenue and room bookings in the quarter, showing it's recovered from the pandemic.

Booked room nights rose 25% to 81.6 million, driving gross bookings up 28% to $24 billion. Revenue, meanwhile, increased 22% to $3.62 billion, which was slightly better than the consensus at $3.6 billion.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also topped $1 billion for the first time, increasing 26% to $1.08 billion. On the bottom line, adjusted earnings per share rose 15% to $4.05, which was below the consensus at $4.12.

Expedia has shifted its strategy to win loyal long-term customers, focusing on app downloads and loyalty members, which it believes will have better long-term payoffs than bidding for clicks on Google.

CEO Peter Kern said, 

Our active loyalty members and active app users are at all-time highs, reflecting our ongoing focus on enhancing our products, technology and consumer offerings to drive greater engagement with our travelers and a more direct and valuable base of business.

Now what

Management did not give formal guidance but said on the earnings call that strong demand has continued into Q4 as consumers prioritize travel over other discretionary categories. It also said that bookings for 2023 were outpacing 2019 levels.

The company plans to continue delevering the balance sheet and returning excess profits to shareholders through buybacks as it believes the stock is undervalued. 

Based on estimates for next year, the stock trades at a price-to-earnings ratio of just 10, which may explain why the in-line results gave the travel stock a boost.