Expedia EXPE shares have lost 6.6% in the past month. The stock has outperformed the Zacks Retail-Wholesale sector and the Zacks Internet - Commerce industry’s decline of 7.6% and 9.4%, respectively, in the same time frame.

Despite a series of new initiatives planned for 2025, Expedia faces significant headwinds that warrant investor caution. Let’s take a deeper look at why holding the stock may be the best approach for now.

Weak Q1 2025 Guidance and Competition Weigh on EXPE

EXPE’s share price decrease resulted from a weakness in the company’s outlook for the first quarter of 2025. It expects lower revenue growth of 3-5% as compared to the previous year’s revenue growth of 8% in the first quarter. 

The Zacks Consensus Estimate for EXPE’s first-quarter 2025 earnings is currently pegged at 43 cents per share, which surged exponentially from 7 cents per share over the past 30 days. The estimate indicates year-over-year growth of 104.76%. 

Expedia expects 2025 revenues to grow in the range of 4-6% year over year. The consensus mark for revenues is pegged at $3.03 billion, indicating a year-over-year increase of 4.87%.

EXPE beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, with the average surprise being 45.86%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

The company expects to face foreign exchange headwinds and lower bookings due to the lapping Leap Year and Easter shift to April. Moreover, there is a seasonal decline in travel demand in the first quarter that is negatively impacting the broader market as well. 

Another challenge that Expedia faces is intense competitive pressures from companies like Booking Holdings BKNG, Tripadvisor TRIP and Airbnb ABNB, to name a few. BKNG expanded its Travel Sustainable program, recognizing more than 400,000 accommodations globally. TripAdvisor’s meta-search business model helped the company with better conversion rates by sending fewer but more qualified leads to its advertisers. Airbnb has more than 7.7 million listings on its platform across 100,000 cities in almost every country and region across the globe.

New Initiatives for 2025 Expected to Aid EXPE

Expedia has planned various initiatives to aid growth in 2025, including its initiative to infuse Generative AI (Gen AI) technology into its services. It plans to leverage AI to enhance personalization, optimize marketing, improve customer service with virtual agents, drive operational efficiency and strengthen B2B partnerships.

It is also planning to deliver more value to its customers. As part of this plan, it has partnered with Flex Pay, a Buy Now Pay Later solution from Upgrade, to offer flexible payment options for cruise bookings in the United States and Canada. The BNPL option helps remove financial barriers for travellers, and will lead to increased bookings and higher conversion rates, benefitting the company’s top line directly.

What Should Investors Do With EXPE Stock?

Expedia faces strong travel demand and has planned new initiatives like AI integration and flexible payment options. However, it faces headwinds from weak first-quarter 2025 guidance, foreign exchange challenges, and intense competition.

EXPE currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Expedia Group, Inc. (EXPE) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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