Markets

Why Expedia Stock Jumped Today

What happened

Shares of Expedia (NASDAQ: EXPE) have jumped today, up by 6% as of 12:20 p.m. EDT, after a couple of Wall Street analysts expressed confidence in the travel booking specialist's ability to weather the COVID-19 downturn. The company also said it was drawing a credit line to beef up its cash position in preparation.

So what

Analysts at Suntrust and Credit Suisse both reiterated buy (or equivalent) ratings on Expedia stock while adjusting price targets to accommodate for recent market volatility. Suntrust reduced its price target from $172 to $140, while Credit Suisse cut its estimate from $161 to $105. Both targets represent considerable upside to current prices of around $49.

Coronavirus on a stop sign at an airport

Image source: Getty Images.

Credit rating agency Moody's affirmed Expedia's debt rating of Baa3, which is about three notches into junk territory, while cutting its outlook from positive to negative due to uncertainties around the global travel industry amid the coronavirus pandemic. The warning is more applicable to bond investors but can still provide useful context to equity investors.

"Expedia Group's credit profile is significantly pressured by the recent sharp decline in global airline and hotel bookings and Moody's expectation that travel bookings will further deteriorate over at least the next two months," according to Moody's. "There are further downside risks in the event travel demand remains depressed beyond the first half of 2020 in a scenario in which COVID-19 is not contained."

Now what

Expedia disclosed in a regulatory filing that that it drew $1.9 billion from an existing revolver that provides up to $2 billion in credit. As of the end of 2019, that credit facility was "essentially untapped," and the travel tech company had $4.6 billion in cash on the balance sheet at the time.

The company withdrew its 2020 guidance last week due to the outbreak.

10 stocks we like better than Expedia
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Expedia wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of March 18, 2020

 

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Moody's. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

EXPE

Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More