Expedia is approaching a "fundamental inflection point," according to an Evercore ISI analyst who upgraded EXPE stock to a buy rating late Thursday. Meanwhile, Evercore downgraded travel rival Airbnb, citing a less attractive risk-reward outlook for ABNB stock.
Expedia is coming off an earnings report in which adjusted earnings and revenue easily topped estimates, boosting EXPE stock. The parent company of Expedia.com, Vrbo and Hotels.com has more room to grow, the Evercore ISI report said. The investment bank upgraded its outlook on EXPE to outperform, from a neutral in-line.
"EXPE's revenue growth acceleration is being driven by a series of sustainable company initiatives and key developments — including the very recently completed tech re-platforming of its key brands, the rollout of its OneKey brand loyalty program, and easing comps," wrote the group of analysts led by Mark Mahaney.
Airbnb, meanwhile, is less compelling at its current price, according to Evercore ISI.
EXPE stock closed 5% higher at 136.38 on the stock market today. ABNB, meanwhile, gained a fraction at 127.15.
EXPE Stock: Up 50% This Year
Expedia stock has gained just under 50% this year, with a significant share of those gains coming after its third-quarter earnings report earlier this month.
Evercore ISI set a target price of 200 for EXPE, implying 50% upside. The report noted that Expedia has for several years underperformed rivals Airbnb and Booking Holdings on key metrics such as bookings, revenue and total room nights. But the analysts see reasons that could change in upcoming quarters.
For one, the company has completed a multiyear effort to place its major Expedia, Vrbo and Hotels.com brands on a single technology platform.
"This will allow the company to run test-and-learn experiments across all three brands simultaneously, and to much more quickly roll out product improvements in Search or Maps or other features to all three brands," according to Evercore.
Further, EXPE in July launched a One Key loyalty program that offers rewards for spending across Expedia, Vrbo and Hotels.com. That could be a "needle mover" next year, according to the report.
Also, leisure travel demand has proved sticky, the report said, with survey data suggesting strong demand for next year.
ABNB Stock: 'Limited Near-Term Catalysts'
Meanwhile, Airbnb has gained about 48% this year. The performance helped ABNB stock land in the S&P 500 in September. ABNB has a market cap of about $81 billion compared to EXPE's $18 billion.
ABNB's gains for 2023 have the stock approaching Evercore's 12 month price target of 136, analysts noted. Evercore downgraded the stock from outperform to in-line in a separate client note Thursday night.
While Evercore called Airbnb the most innovative company in online travel, the firm said EXPE and BKNG stock both have better risk-to-reward outlooks at their current prices.
"We remain impressed by the fundamental strength of this business, and we are keeping our estimates and price target unchanged," the report said. "But we see limited near-term catalysts to drive material upside to the current price tag."
Third-quarter earnings and revenue reported earlier this month by Airbnb topped analyst estimates. But the company warned that it was seeing greater volatility in bookings for the current quarter.
ABNB Vs. EXPE
According to IBD Stock Checkup, EXPE is the third best-rated stock in MarketSmith's Leisure-Travel Booking Group. Expedia stock has an IBD Composite Rating 95 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating — with the best growth stocks scoring above 90.
ABNB stock, on the other hand, ranks just behind EXPE with an Composite Rating of 94, according to IBD Stock Checkup.
The top rated stock in the group is India-focused booking platform MakeMyTrip, followed by BKNG.
