Why Expedia shares gained today

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What happened

Shares of Expedia (EXPE 5.71%) ended higher today after the online travel agency beat revenue estimates in its third-quarter earnings report and commented positively on future trends.

The stock gained 5.7% on the news.

So what

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

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

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

Expedia has changed its strategy for winning long-term loyal customers, focusing on app downloads and loyal members, which it says will have better long-term earnings than bidding for clicks on Google.

CEO Peter Kern said:

Our active loyalty members and active app users are at record levels, reflecting our continued focus on improving our products, technology and consumer offerings to drive greater engagement with our travelers and a more direct and valuable base of activity.

Now what

Management did not provide formal guidance, but stated on the earnings call this strong demand continued into the fourth quarter as consumers prioritized travel over other discretionary categories. He also said bookings for 2023 exceeded 2019 levels.

The company plans to continue to deleverage the balance sheet and return excess earnings to shareholders through buybacks, as it believes the stock is undervalued.

Based on estimates for next year, the stock is trading at a price-earnings ratio of just 10, which may explain why online results gave the travel stock a helping hand.

Jeremy Bowman has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

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