Shares of online travel agency Expedia Group(NASDAQ: EXPE) were up 11.5% in December, according to data provided by S&P Global Market Intelligence. The company's revenue has rebounded to an all-time high and profits are strong, boosting investor confidence. And indeed, throughout the month, Wall Street was increasing its outlook for the stock.
Multiple analysts raised their price targets for Expedia stock during December. And management believes its stock is undervalued as well. The company had an existing authorization plan in place for share repurchases, with the ability to repurchase 1 million shares. However, in November, it added $5 billion in authorization.
It's possible, if not likely, that Expedia's management was repurchasing shares during December. This potentially boosted the stock price. And Wall Street's higher price targets also helped stimulate buying demand from investors.
The good times are back for Expedia
In the third quarter of 2023, Expedia generated record quarterly revenue of $3.9 billion. Quarterly net income of $425 million wasn't quite a record but it was darn good. In short, the company experienced a record slowdown during the pandemic when no one was traveling but the business has fully recovered and more.
Indeed, Expedia's business could continue breaking records from here. On Dec. 5, the company announced that it had landed new travel partners in Europe, which could help its business grow more.
Compared to comparable companies Booking Holdings and Airbnb, Expedia stock looks cheap from a free-cash-flow perspective. Management specifically cited this as its reasoning to aggressively repurchase shares, which is something that can boost shareholder value.
EXPE Price to Free Cash Flow data by YCharts
Looking ahead
To be clear, Expedia's share-repurchase plan is substantial considering its market capitalization is only $20 billion. The company is profitable and has plenty of cash on hand to support its more than $5 billion plan.
Of course, Expedia's buybacks wouldn't mean much if the business was in material decline. But it's not -- as Q3 results demonstrated, business is good. And there are reasons to be encouraged moving forward.
Specifically, Expedia just united its loyalty program across its various platforms, which include the Expedia platform and Vrbo. It will be interesting to watch if this unified loyalty program can drive traffic across the various brands under its umbrella.
Therefore, it's understandable why Wall Street was upbeat about the stock in December and why Expedia's management was likely aggressively repurchasing shares. So long as the company keeps profitably growing as it is, the stock may have more upside in 2024.
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Jon Quast has positions in Airbnb. The Motley Fool has positions in and recommends Airbnb and Booking Holdings. The Motley Fool has a disclosure policy.
