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What Do Expedia’s Newly Added Risk Factors Tell Investors?

Expedia (EXPE), an S&P 500 company, provides online travel services. It operates through brands such as namesake Expedia, Vrbo, Trivago, HomeAway, CheapTickets, and Travelocity. 

For Q4 2021, Expedia reported a 148% year-over-year jump in revenue to $2.3 billion, slightly below the consensus estimate of $2.31 billion. It posted adjusted EPS of $1.06 compared to a loss per share of $2.64 in the same quarter the previous year.

In recent years, Expedia has divested a number of its businesses. In 2021, it sold its Classic Vacations and Egencia brands. In 2020, it sold its Bodybuilding.com and SilverRail units.

With this in mind, we used TipRanks to take a look at the newly added risk factors for Expedia.

Risk Factors

According to the new TipRanks Risk Factors tool, Expedia’s main risk category is Legal and Regulatory, which contains 8 of the total 31 risks identified for the stock. Finance and Corporate and Ability to Sell are the next two major risk categories with 7 and 5 risks, respectively. Expedia has recently added two new risk factors and revised several previously highlighted risks. 

In a newly added Legal and Regulatory risk factor, Expedia discusses the burden of complying with environmental, social, and governance (ESG) demands. It informs investors that there is an increasing focus on corporate ESG responsibilities. At the same time, ESG standards have continued to evolve. Expedia cautions that the evolving standards may result in a significant rise in its ESG compliance costs. Moreover, its ESG practices may not meet the expectations of investors and other stakeholders. The company goes on to warn that falling short of ESG expectations may adversely impact its relationships with employees, customers, and partners. Moreover, Expedia cautions it may be subject to lawsuits over its ESG practices.

In another newly added risk factor under the Ability to Sell category, Expedia informs investors that it operates in an intensely competitive market. It explains that competition pits it against established and emerging rivals, including Booking Holding (BKNG), Airbnb (ABNB), and Google (GOOGL). It explains that some of these competitors may have significant advantages, such as a broader global presence, greater brand recognition, and more financial resources.

Expedia has revised a previously highlighted Production risk factor to emphasize that labor challenges could seriously harm its business. It explains that its performance largely depends on the talents and efforts of its employees. As a result, the company’s future success will depend on its ability to hire and retain highly skilled personnel across all the areas of operation. The problem is that the labor market is currently tight, resulting in intense competition for well-qualified employees. As a result, increasing personnel expenses may adversely affect Expedia’s operating results.

Expedia’s stock has gained more than 40% over the past 12 months.

Analysts’ Take

Susquehanna analyst Shyam Patil recently reiterated a Hold rating on Expedia stock and raised the price target to $210 from $190. Patil’s new price target suggests 6.51% upside potential.

Consensus among analysts is a Moderate Buy based on 11 Buys and 11 Holds. The average Expedia price target of $218.62 implies 10.88% upside potential to current levels.

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