HEDGEYE EDGE
As a follow up to our pre-earnings season deep dive presentation, we’re taking another look at relevant tracking data for the Online Travel segment. Much like we said last week and a month ago, trends across the global leisure landscape remain encouraging in the new year, and on balance, are tracking ahead of expectations. Despite macro and geopolitical uncertainty and despite the steep comps to start the year, the online travel industry continues to power ahead. No, the industry is not growing gangbusters but there are certainly pockets of material strength.
Turning to the OTAs, our finalized data implies Q4 top line beats for EXPE and ABNB with BKNG looking in line to slightly above Street expectations. On ABNB, a name we recently shifted higher on our Position Monitor to Long Bias, we see a strong setup on the Q4 print. The company continues to put up numbers, with added market share gains and accelerating growth over the last few months – bodes well for the Q4 print and outlook. For EXPE, we believe Q4, and the YTD, reflect some of the early benefits of the company shifting from “defense” to “offense”. Either way, the company is well set up to beat across the board in Q4 and current data should support an optimistic tone for Q1 and ’24. EXPE’s stock has done well since Q3 earnings, but the catalyst path from here remans strong against an inexpensive valuation… our preferred setup. EXPE remains a Best Idea Long with significant upside left from here.
top down | DATA TRACKING – STRENGTH CONTINUES
The latest data read across relevant metrics echoes our leisure resilience theme, especially for the OTAs. Despite fears in the investment community of a sharp slowdown in leisure travel, the data, at least in the global context, remains strong on a YoY basis. Sure, leisure travel growth has decelerated vs the peaks of Q2’22 and Q1’23, but it’s not decelerating right now. Furthermore, judging by estimates, decelerating growth is still the baseline expectation across the Street. Looking to the quarters, the magnitudes of beats and directional color will be most impactful.
The slides below feature all relevant mobile data and feature our key callouts for this month’s update. EXPE, our go to name, and more recently ABNB, continue to jump off the page and that should bode well going into Q4 earnings – more of that discussion in the next section.
BOOKINGS TRACKERS | expe, bkng, & abnb
It’s still early days for the YTD, but with one month in the books and OTA earnings kicking off later this week, we have a pretty good sense of how conference call tones should sound. For all intents and purposes, we see positives across the board for the OTAs with growth maintaining and, in some cases, accelerating. The OTAs, given their global scale, are benefiting from outbound and cross border acceleration, AsiaPac travel recovering, as well as ROW regions showing a nice pick up. Meanwhile, Western Hemisphere markets (US and EU) are holding firm and should support growth for most of the operators. The industry may still be in growth mode, but the biggest winners – relative to expectations and sentiment – appear to be EXPE and ABNB.
For EXPE, where the expectations bar has come up but is still lower than peers (for good reason), we see a strong set of Q4 results on the horizon. It’s been a long time since EXPE put up a clean sweep across the line items of Bookings, Revenues, and EBITDA, but judging by the alternative data and other factors, there’s a decent probability that shareholders will be rewarded in Q4. Management conservatively guided “in line” bookings growth (vs Q3) and modest acceleration in revenue and EBITDA growth. Owing to the strength we saw in November and December per our data, we see the company coming in nicely ahead of those expectations, resulting in a healthy beat of consensus. Given the steep comps in Q1 we don’t think management will guide to acceleration (assuming our Q4 read is directionally accurate) but they could imply growth rates above current consensus expectations. Our model estimates for Q4 and ’24 are mostly unchanged relative to last week’s deck (see HERE).
For BKNG, the juggernaut of the travel universe, we’re less bullish heading into the print. No, we’re not forecasting a miss, but we aren’t forecasting a big beat either – the first time in a while. For a stock trading at all time highs and facing steep growth comps and incremental geo mix risk (EU and MEA), we’re perhaps just a little more cautious heading into the print. Given the backdrop, which is expanded upon in the slides below, we recently moved BKNG down a notch on our Position Monitor to the Neutral bucket.
For ABNB, the wildcard is always the stock reaction, but we like the setup into the print, with accelerating growth trends back on the table for Q4 and EBITDA beats for the foreseeable future. Of course, it’s early days in Q1 and guidance will matter A LOT for how the stock trades, but both Q4 and Q1 look promising vs expectations. On our tracker, we see solid upside to Room Nights growth, and even under some more conservative ADR assumptions, we anticipate beats in both bookings and revenue. ABNB has had some issues managing expectations around the prints, but the data remains positive, aided by trends ex. US. Consensus has inched up their #’s ahead of next week’s print, but we still see beats on both Q4 and the guide. With ABNB now on our Long Bias list, we’re looking for an entry point / reason to move the stock higher in the pecking order.
Data trackers by company – EXPE, BKNG, and ABNB – are shown below. For specific company models, please inquire directly with the Hedgeye GLL team or your sales representative.
