EXPE Stock Up 4% though Expedia Q1 2020 Earnings Show that Revenue Tanks 15%

On May 21, 2020 at 8:25 am UTC by Bhushan Akolkar · 3 min read
EXPE Stock Up 4% though Expedia Q1 2020 Earnings Show that Revenue Tanks 15%
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With the COVID-19 effect, Expedia revealed rather disappointing Q1 earnings results: adjusted net loss for the first quarter was $285 million, 545% up Y-o-Y. Additionally, the gross air bookings revenue for the company also tanked a massive 56%. However, EXPE stock is up now.

With the shutdown and travel restrictions all across the globe due to the novel coronavirus pandemic, the travel industry is on a toss. On Wednesday, May 20, the online travel agency Expedia Group Inc (NASDAQ: EXPE) reported its Q1 2020 earnings. Meanwhile, EXPE stock is around 4% up now.

The company missed the estimates for the first-quarter reporting a loss of $1.83 per share. Besides, the total sales for Q1 2020 stood at $2.2 billion, 15% down from the year-ago quarter. The financial devastation by the COVID-19 actually started in March, as so we expect the first two months to have been good.

Despite this, the adjusted net loss for the first quarter was $285 million, 545% up Y-o-Y. Moreover, the company’s marketing spent also dropped 20% in Q1 2020 at $1.2 billion, against that of Q1 2019.

The gross air revenue for the company dropped 56%, said Expedia. There was a 26% decline in the total air tickets sold and a 41% decrease in revenue per ticket. Explaining the entire situation, Expedia wrote:

“In January, gross bookings growth was positive, as COVID-19 modestly impacted results, with the virus largely limited to the Asia Pacific region. In February, gross bookings declined year over year as the virus spread, particularly into Europe by later in the month. During March, with COVID-19 becoming a global pandemic, including significantly impacting North America, our largest region, cancellations exceeded new bookings, and total gross bookings were negative for the month.”

The challenges ahead for the travel industry seem monumental and governments have been more aggressive on lockdown in Q2 2020. However, during the earnings call executives said that they could see some marginal recovery in May.

Expedia Group CEO Positive about Future despite Controversial Q1 Earnings Results

On the earnings’ call, the new Expedia Group CEO Peter Kern said that these are some unprecedented times for the company. “I don’t think any company could have been prepared for this. We learned a lot and will be in much, much better shape for the future,” he added.

He said that this virus has created an urgency to streamline operations. He also admitted that this is the time for the company to overcome some thorny technology issues. Last month, the Expedia Group also announced a new capital raising of $3.2 billion. Of this, $2 billion will go towards debt restructuring. The other $1.2 billion comes as an equity investment by Apollo Global Management and Silver Lake Partners.

CEO Kern also put a major focus on revamping the company’s marketing plans. With Google tweaking its search algorithm, the company’s organic visibility for online search has dropped drastically. Kern said that they would put their future focus on increasing the ad budget. Kern said:

“We’ve not been disciplined about it. We’ve chased unhealthy growth over the years, and Google and other performance marketing channels have tried to disintermediate us, and we’ve made some not terribly smart choices along the way.”

In the period between mid-February to mid-March, Expedia Group shares tanked 50% going below $50 levels. However, there has been a steady recovery from these lows. On Wednesday, Expedia (EXPE) stock price ended 4.23% positive closing just under $80 levels. It looks like investors have already anticipated the industry pressure beforehand.

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Bhushan Akolkar
Author: Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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