EXPE

Based on the provided analysis, Expedia (EXPE) presents a compelling but nuanced investment case.

Technical Analysis shows EXPE has exceptional momentum, dramatically outperforming the market and trading near its 52-week high. This strong trend is positive, but the stock is in overbought territory, suggesting near-term vulnerability to a pullback.

Fundamentals are strong, characterized by impressive revenue growth, exceptionally high profit margins, and a stellar return on equity. A significant concern, however, is the negative operating cash flow, which signals potential short-term liquidity pressure despite overall profitability.

Valuation presents a paradox. The stock looks expensive on a trailing basis but appears potentially undervalued when considering forward earnings estimates, as indicated by a very low forward P/E and PEG ratio. This suggests the market is pricing in robust future growth.

Recommendation: CAUTIOUS BUY. EXPE's powerful operational performance and attractive forward valuation underpin a positive long-term outlook. However, investors should be aware of the stock's high volatility, its technically overbought status, and the cash flow concerns. A strategic approach, such as waiting for a potential market-driven pullback to establish a position, would be prudent to mitigate near-term risks.

*Note: This is not investment advice, for reference only.*

RockFlow Model Forecast: Three Scenarios for 2026

Based on the provided analysis, here is a 12-month outlook for Expedia (EXPE):

12-Month Outlook for EXPE:

The outlook for EXPE is cautiously positive, anchored by its strong fundamental performance and attractive forward valuation. Key catalysts include the continued execution of its growth strategy, which should translate its high revenue growth into earnings, validating its seemingly undervalued forward P/E and PEG ratios. Primary risks involve the stock's technically overbought condition suggesting vulnerability to a near-term pullback, coupled with concerns over negative operating cash flow creating potential short-term liquidity pressure. Given the absence of a specific analyst target, a prudent target range would be contingent on the stock weathering near-term volatility; a successful navigation of these risks could see significant upside, while failure to address the cash flow concern may cap gains. A strategic entry point on a market pullback is advised to improve risk/reward.

Wall Street Consensus

Most Wall Street analysts are optimistic about EXPE's 12-month outlook, with consensus target around $290.76, indicating expected upside potential.

Overall, EXPE has investment potential but also faces challenges. Here are key factors to weigh before investing.

Overall Assessment: EXPE has demonstrated exceptionally strong momentum recently, significantly outperforming the market over the last quarter with a substantial 38.36% gain. The stock's high beta of 1.429 confirms it has been considerably more volatile than the broader market, contributing to these pronounced swings.

Short-term Performance: The stock's rally is accelerating, evidenced by a robust 6.69% gain over the past month building on the impressive 3-month performance. With a relative strength versus the market of nearly 35% over this period, EXPE is not just rising but is dramatically outpacing the broader market benchmarks, indicating strong investor conviction.

Current Position: At $299.97, EXPE is trading near the very top of its 52-week range ($130.01 - $303.80), just 1.3% below its peak. This positions the stock in technically overbought territory, suggesting much of the near-term positive momentum may be priced in. While the strong trend is undeniable, the significant 52-week rally from the lows and the proximity to the high warrant caution for new entries, as the risk of a pullback appears elevated.

Revenue & Profitability Expedia demonstrates impressive revenue growth with Q3 2025 revenue reaching $4.41 billion, up substantially from $3.79 billion in Q2. The company maintains strong profitability with a net profit margin of 21.7%, supported by an exceptional gross profit margin of 91.5%. Operating income margin expanded significantly to 23.5% in Q3 from 12.8% in Q2, indicating improved cost management efficiency.

Financial Health The company's financial structure shows moderate leverage with a debt ratio of 25.8% and solid interest coverage of 16.7 times. However, concerning cash flow metrics show negative operating cash flow per share of -$4.02 and negative cash flow to debt ratio of -0.08, suggesting potential liquidity pressures despite the company's $61.49 cash per share position.

Operational Efficiency Expedia achieves extraordinary operational efficiency with a remarkable return on equity of 71.7%, though this is amplified by a high equity multiplier of 18.8. Asset turnover remains modest at 0.18, indicating room for improvement in asset utilization efficiency despite the strong ROE performance driven by financial leverage.

Valuation Level: EXPE appears to show a significant valuation discrepancy between its trailing and forward-looking metrics. While the TTM PE of 25.7 appears elevated, the forward PE of 6.9 and exceptionally low PEG ratio of 0.035 suggest strong expected earnings growth that makes the current price look potentially undervalued. However, the high PB ratio of 13.78 and elevated EV/EBITDA of 18.1 indicate the market is pricing in substantial intangible assets and future profitability.

Peer Comparison: Without specific industry average data for comparison, a definitive peer assessment cannot be provided. The forward valuation metrics, particularly the low forward PE and PEG ratio, would need to be evaluated against industry benchmarks to determine EXPE's relative positioning. A meaningful comparison would require the relevant industry averages for these key valuation ratios.

Volatility Risk: With a Beta of 1.429, EXPE exhibits roughly 43% more volatility than the broader market, making it susceptible to amplified price swings during periods of market stress. This is further evidenced by its significant 1-year maximum drawdown of -33.84%, indicating substantial historical loss potential from a previous peak.

Other Risks: The absence of significant short interest suggests that bearish speculative pressure is currently not a major concern for traders. However, investors should remain attentive to the company's specific operational risks, such as reliance on travel demand, which is cyclical and sensitive to economic conditions.