EXPE Expedia Group
Restructured number two OTA with B2B tailwinds; fairly priced unless AI search erodes its traffic moat.
The story
Expedia is the number two global online travel agency, with a large and fast-growing B2B (white-label and API) business and a brand portfolio (Expedia, Hotels.com, Vrbo) that it is consolidating onto one loyalty and tech stack. It is a mature, cash-generative business: it holds share against Booking and Airbnb but does not dominate, and it relies heavily on paid search. After years of cost restructuring, margins are expanding and buybacks are shrinking the share count.
Growth of 7% sits slightly below the ~8% five-year CAGR, reflecting mid-single-digit travel demand plus B2B share gains, and fades to 3% at maturity. The 17% target margin holds near the TTM 17.8% rather than extrapolating further gains, since marketing intensity against Google and Booking caps OTA economics below Booking's level. Sales-to-capital stays at about 2.2 because negative working capital from merchant bookings keeps reinvestment light, and beta of 1.2 reflects cyclical, discretionary travel demand.
Value drivers
| Revenue growth (Y1) | 7.0% |
| Terminal growth | 3.0% |
| Forecast horizon | 7y |
| Target operating margin | 17.0% |
| Years to target margin | 4 |
| Sales-to-capital | 2.20 |
| Beta | 1.20 |
| Failure probability | 2.0% |
| Cost of capital (WACC) | 9.9% |
| Terminal WACC | 9.1% |
Valuation bridge
| PV of explicit FCFF | 11.19B |
| PV of terminal value | 21.50B |
| Equity value | 30.07B |
| ÷ shares → per share | $250.54 |
News
neutral -0.10 · 8 articles
- Bank of America Flags Surprising Risk to Apple Stock
- Expedia Group to lay off 58 corporate employees
- Consumer Stocks Are at a Crossroads. TJX and 2 More to Buy, 3 to Avoid.
- Apple Could Keep Selling iPhones and Still Lose a Key AI Battle
- Apple Stock Falls After Bank of America Flags a New AI Threat
- Is Booking Stock Worth More Than Its Competitors?
- Banks have profited from idle cash for years. AI agents could change that.
- Meta Stock Soared 27% on Muse AI. The Hard Part Comes Next.
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 16.80B | 7.0% | 17.6% | 2.42B | 499.55M | 1.92B | 1.74B |
| 2 | 17.86B | 6.3% | 17.4% | 2.54B | 483.61M | 2.06B | 1.70B |
| 3 | 18.88B | 5.7% | 17.2% | 2.65B | 460.11M | 2.19B | 1.65B |
| 4 | 19.82B | 5.0% | 17.0% | 2.76B | 428.98M | 2.33B | 1.60B |
| 5 | 20.68B | 4.3% | 17.0% | 2.87B | 390.37M | 2.48B | 1.55B |
| 6 | 21.44B | 3.7% | 17.0% | 2.98B | 344.63M | 2.64B | 1.50B |
| 7 | 22.08B | 3.0% | 17.0% | 3.07B | 292.31M | 2.78B | 1.44B |
Key risks
- Google AI search and agentic booking could disintermediate the OTA traffic funnel and raise customer acquisition costs
- A travel demand downturn or macro recession would hit cyclical bookings and the operating leverage built into margins
- Vrbo's consumer brands keep losing share to Booking and Airbnb, offsetting B2B growth
Catalysts
- Continued B2B growth above 20% and further cost cuts pushing margins toward 18-20%
- Aggressive buybacks at a mid-teens P/E raising per-share value