The company blamed its Q3 earnings miss on poor Google search visibility.
On Thursday, shares of Expedia took a beating after the company released its third-quarter earnings report. The company’s earnings, revenue, and full-year guidance fell short of Wall Street’s forecasts.
Overall, it was a bad day for the travel industry as a whole. The online travel company TripAdvisor saw its shares fall by more than 20% as well, thanks to poor third-quarter earnings.
In fact, the two companies experienced many of the same problems. Here is an overview of Expedia’s third-quarter earnings report and what we can expect from the company going forward.
What happened during the third quarter?
During the third quarter, Expedia earned $3.56 billion in revenue, which slightly missed forecasts of $3.58 billion. The company’s non-GAAP earnings were $3.38 per share, whereas investors were expecting earnings to hit $3.80 per share.
However, it wasn’t all bad news for Expedia. The company’s gross bookings increased by 9% to reach $26.9 billion. And the company’s lodging revenue increased by 11%.
But Expedia’s air travel revenue was down by 3%, and the company saw a 10% decrease in revenue per ticket. According to the company, this was caused by a reclassification of partner fees.
Ultimately, it was the company’s full-year guidance that put the final nail in the coffin. For 2019, investors were expecting earnings to increase by 12% to 15%. But because of the company’s third-quarter miss, it only expects its earnings to increase by 5% to 8%.
What’s next for Expedia?
Both Expedia and TripAdvisor said that recent changes in Google’s algorithm contributed to decreased earnings. Both companies saw a drop in organic search results since the new Google algorithm favors paid advertising.
After the earnings call, many Wall Street analysts downgraded the company or lowered its price target. A JMP Securities analyst said he believes the company’s SEO headwinds will persist well into the fourth quarter, affecting the company’s profitability.
The company is considered a moderate buy, with an average price target of $135.93. The drop in Expedia’s shares could present a good buying opportunity, but investors may want to wait and see how the company fairs during the final few months of the year.