Please ensure Javascript is enabled for purposes of website accessibility

Why Expedia Inc. Shares Lost 19% in January

By Jeremy Bowman - Feb 7, 2016 at 8:32AM

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

After a standout 2015, Expedia shares have pulled back. Is this a buying opportunity?

What: January was a bad month for the online travel industry and it was no different for Expedia Inc. (EXPE -3.45%). The perceived slowdown in the global economy and analyst downgrades pushed Expedia shares down over the course of the first two weeks of January along with the broader market.

EXPE Chart

EXPE data by YCharts.

So what: After jumping 46% in 2015, the initial sell-off may be a sign that the market believes the stock was overbought. 

Several times throughout the month Expedia's price target was lowered. On Jan. 15, Evercore ISI dropped its price target from $155 to $129, and Expedia dropped on a downgrade for rival earlier in the month as Raymond James cited competition from Airbnb and hotel consolidation as factors that could impede the online travel agents' growth. 

Toward the end of the month, Expedia fell again as Goldman Sachs downgraded Priceline and TripAdvisor and lowered its price target on Expedia all the way to $93 from $135. Goldman cited concerns about Airbnb as well. Deutsche Bank also issued a bearish note on the online travel industry, mentioning fears of terrorism following November's Paris attacks. 

Both banks also noted the threat of hotel industry consolidation, which is expected to give the major hotel companies greater leverage against the OTAs.

Now what: Wall Street appears to be turning its back on the online travel industry, citing competitive threats and macroeconomic factors, but there's good reason to believe in the long-term growth of the industry. Priceline and Expedia have eliminated competitors, helping to boost profit margins, and the travel industry should continue to grow as consumers in the developing world enter the middle class and the global economy expands. 

Even Airbnb offers a way to encourage travel by providing an alternative to hotels, and low oil prices have also put more money in travelers' pockets and made airfares cheaper. Expedia shares are now down nearly a third from their all-time high just a few months ago, but analysts are expecting EPS to grow by more than 40% this year. If Expedia can deliver on that expectation, shares should bounce back.


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.
$93.82 (-3.45%) $-3.35

*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 07/06/2022.

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.