EXPE Expedia Group
Cash-gushing, shrinking share count, but a second-place player; 6% barely beats the 5% already priced.
The business
Expedia runs online travel marketplaces (Expedia, Hotels.com, Vrbo) and a B2B unit that powers travel sales for banks, airlines and other agencies. It earns commissions and merchant margins on hotel, vacation-rental, air, car and package bookings, and adds advertising revenue. Customers pay up front, so the business collects cash before it pays suppliers, and that negative working capital drives FCF well above net income.
Quality gate · 86/100
Moat & management
| Moat | narrow moat |
| Source | scale |
| Trajectory | stable |
| Management | adequate |
Two-sided scale in supply, loyalty data and B2B distribution gives it real advantages. B2B is the widening piece and is growing faster than consumer. Still, Booking has more scale and better margins, and Google owns the top of the funnel, so Expedia has to keep paying for traffic. Its hold on consumers is weaker than a wide-moat franchise's.
Share count has fallen about 7% a year through aggressive, reasonably priced buybacks, and leverage is sensible. The record also includes the costly, long-delayed platform consolidation, repeated CEO turnover, and heavy stock compensation that eats part of the buyback.
Owner-earnings inputs
| Owner earnings (TTM) | 2.18B |
| Owner-earnings yield | 6.9% |
| Free-cash-flow yield | 14.1% |
| Growth used (normalized) | 6.0% |
| Market-implied growth (reverse DCF) | 4.9% |
| Terminal growth | 3.0% |
| Discount rate (hurdle) | 10.9% |
Projected owner earnings
| Yr | Owner earnings | Growth | PV |
|---|---|---|---|
| 1 | 2.31B | 6.0% | 2.08B |
| 2 | 2.44B | 5.8% | 1.99B |
| 3 | 2.58B | 5.6% | 1.89B |
| 4 | 2.72B | 5.4% | 1.80B |
| 5 | 2.86B | 5.1% | 1.71B |
| 6 | 3.00B | 4.9% | 1.62B |
| 7 | 3.14B | 4.7% | 1.53B |
| 8 | 3.28B | 4.5% | 1.44B |
| 9 | 3.42B | 4.3% | 1.35B |
| 10 | 3.56B | 4.1% | 1.27B |
| 11 | 3.70B | 3.9% | 1.19B |
| 12 | 3.83B | 3.6% | 1.11B |
| 13 | 3.97B | 3.4% | 1.04B |
| 14 | 4.09B | 3.2% | 966.02M |
| 15 | 4.22B | 3.0% | 897.49M |
Key risks
- AI agents and Google intermediating travel search, which could turn OTAs into commoditized back-end suppliers
- Booking's superior scale plus hotels' direct-booking push compressing take rates and raising marketing costs
- Cyclical travel demand and shocks such as pandemics or recessions, with FCF inflated by float that reverses when bookings fall
Catalysts
- B2B segment compounding at double digits and gaining share of the mix
- Margin expansion from the finished single tech stack and loyalty program, with continued buybacks at a high FCF yield
⚠ maintenance capex ≈ min(capex, D&A), capped at FCF · Price pays for ~5%/yr owner-earnings growth over 15y (reverse DCF); model credits 6%.