Expedia shares sink as vacation rental weakness fuels revenue forecast trim

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By Pratyush Thakur

(Reuters) -Expedia shares tumbled as much as 13% to a near six-month low in early trading on Friday, after the online booking firm cut its annual forecast for revenue growth due to weakness at its vacation rentals brand Vrbo.

Vrbo was seeing a slower rebound than the company’s expectations following a restructuring aimed at allowing customers to book across brands under one platform.

“We had pulled back on Vrbo marketing in the second half of last year… And while we have been ramping that spend and the product has been improving, we have seen a slower-than-expected recovery,” outgoing CEO Peter Kern said on a post-earnings call late on Thursday.

The company, which also owns Hotels.com, projected full-year revenue growth in the mid-to-high-single digit percentage range, down from a prior forecast of double-digit growth.

“Expedia is in a tough spot. The broader business is growing … however, Vrbo is displaying issues which may be more difficult to fix than management is letting on,” brokerage RBC said.

At least seven brokerages cut their price targets on Expedia, with Piper Sandler downgrading the stock to “neutral” from “overweight”.

“The near-term growth trajectory is uncertain as the company struggles to sustainably improve growth and materially raise traffic at two of its core brands (Vrbo and Hotels.com),” Wedbush analysts said in a note.

Shares of Expedia trade about 25.32 times their forward profit estimates, below the 29.44 multiple for rival Booking Holdings, which on Thursday topped market estimates for quarterly profit.

(Reporting by Pratyush Thakur in Bengaluru; Editing by Arun Koyyur and Sriraj Kalluvila)