Hook & thesis (short):
Expedia is primarily a lodging-heavy online travel agency (lodging ~80% of 2024 sales) that already prints healthy profits and free cash flow during the peak booking cycle. The trade here is straightforward: buy a pullback around the mid-200s and size for a confirmed acceleration in ticketing (a StubHub-type monetization) or a marquee distribution partnership (MLB cited as the likely catalyst). Ticketing is not huge today versus lodging, but it is high-margin, sticky, and - if stitched into Expedia's distribution - an outsized incremental lever to bookings, fees, and advertising.
This is a tactical-long idea: the stock is trading around $273 per share as of 01/20/2026 with a sizable operational safety net (positive operating income and consistent cash generation in several quarters). The optionality is in ticketing and improved monetization; the risk is execution and macro-driven travel softness. The recommended trade is a disciplined long with explicit entry, stops and two sensible targets.
Why the market should care - the fundamental driver
Expedia's business is a classic platform: distribution of lodging (80% of sales in 2024), air, cars and advertising (7% of 2024 sales). The company reported revenue of $4.412B in Q3 FY2025 with operating income of $1.036B and net income of $964M, implying an operating margin roughly 23.5% and net margin near 22% for the quarter - healthy for an OTA. Profitability and high incremental margins matter because they allow the company to:
- Invest in new product lines (ticketing distribution / secondary ticket marketplace features).
- Fund buybacks and dividend (current quarterly dividend $0.40 -> $1.60 annualized).
- Withstand short-term travel cycles or working-capital swings.
Ticketing or a strategic partnership to distribute live-event inventory is attractive because it is: (a) high take-rate (fees are a bigger percentage of ticket prices than typical OTA commissions), (b) frequency-smoothing across travel cycles (events are calendar-driven), and (c) adds advertising/first-party data that improves cross-sell. If Expedia can pair a ticketing feed with its lodging+experience ecosystem, the incremental revenue per customer could rise materially without large incremental customer-acquisition spend.
Supporting numbers from recent filings and cash flow behavior
- Q3 FY2025 (07/01/2025 - 09/30/2025): Revenue $4.412B, operating income $1.036B, net income $964M, diluted EPS for the quarter ~ $7.33.
- Earlier quarters show seasonality and volatility: Q2 FY2025 revenue $3.786B and net income $322M; Q1 FY2025 revenue $2.988B and net loss $197M. That volatility underscores the importance of positive quarters like Q3 to FY guidance and multiple expansion.
- Cash flow is lumpy but meaningful: Q1 FY2025 net cash from operating activities was $2.952B, Q2 was $1.121B, while Q3 flipped to negative $497M (working-capital / timing effects). The swing suggests the company can generate strong cash in some quarters but should be monitored for quarter-to-quarter cash volatility.
- Balance sheet highlights: current assets $12.85B vs current liabilities $17.262B (current ratio < 1.0), long-term debt roughly $6.216B, and equity attributable to parent ~ $1.337B. The company carries meaningful liabilities and should manage liquidity carefully.
- Dividend: $0.40 quarterly (ann. $1.60). At a $273 stock price that implies a yield around 0.6%.
Valuation framing
Using the most recent diluted shares in Q3 FY2025 (131.014M diluted shares) and the last trade price (~$273.44), an implied market capitalization is roughly $35.8B (price x diluted shares). If you annualize Q3 FY2025 diluted EPS (Q3 EPS ~ $7.33) - a rough shorthand - you get an annualized EPS near $29.3 and an implied price-to-earnings multiple in the neighborhood of ~9x. That math is crude (it annualizes a single-quarter EPS that benefits from seasonal trends) but it highlights a key point: the stock is not trading on heroic growth expectations. A plausible, durable revenue kicker from ticketing or a sports distribution partnership could re-rate the multiple higher because the upside is mostly incremental margin, not heavy capex.
There aren't reliable OTA peers in the dataset to do a direct multiple comparison; qualitatively, major OTAs and travel platforms trade on a mix of growth, NRR (for corporate/business travel), and margin stability. Expedia's earnings power and the optionality of ticketing give it a better-than-average chance to expand the multiple if management can translate distribution into durable, recurring revenue.
Trade plan (actionable):
Setup: Tactical long (size dependent on portfolio risk). The idea is to buy the dip around current levels and treat headline news (a confirmed MLB deal or another major ticketing partner) as a re-rating trigger.
| Parameter | Level / Note |
|---|---|
| Suggested entry | $265 - $280 (aggressive nibble at $280, add toward $265) |
| Stop | $245 (about 10% below $273) - use a hard stop or options hedge |
| Target 1 | $320 (near-term target; ~17% upside from $273) |
| Target 2 | $360 (event-driven target if ticketing/MLB partnership announced and early monetization signs; ~32% upside) |
| Time horizon | Position / medium-term (3-12 months depending on catalyst timing) |
Catalysts (2-5 to watch)
- Public confirmation of a distribution/partnership with a major sports league (MLB cited by market chatter) that routes secondary tickets or event packaging through Expedia channels.
- Product rollouts that cross-sell tickets with lodging and experiences (early signs: measured ARPU uplift, higher take-rate).
- Sequential margin improvement and better-than-expected guidance from management in the next earnings cycle showing durable fee revenue growth.
- Share repurchases or more aggressive capital return that tighten the float (management has been returning capital; dividend currently $0.40/qtr).
Risks & counterarguments
- Execution risk on ticketing: integrating a secondary ticket marketplace or partnering with leagues is product and regulatory heavy. If Expedia mis-prices risk, or if ticketing partnerships fall through, the incremental revenue may never appear.
- Scale mismatch - lodging dominates revenues: lodging is roughly 80% of 2024 sales. Even a well-executed ticketing business will take time to materially change top-line composition; investors may demand faster, larger proof points than the business can deliver.
- Macroeconomic / travel cycle risk: travel demand is cyclical. Q3 FY2025 produced outstanding margins, but Q1 and other quarters show losses or weak net income. A macro slowdown would compress volumes and make any new initiatives harder to ramp.
- Balance sheet & liquidity: current assets (~$12.85B) vs current liabilities (~$17.262B) and long-term debt (~$6.216B) mean liquidity and covenant risk deserve attention, particularly if cash flows swing negative unexpectedly. Q3 FY2025 had negative operating cash flow (-$497M), a reminder that cash is lumpy.
- Competitive pressure: Booking, Airbnb and direct-supplier initiatives (hotels, ticketing platforms) are intense. Competitors could undercut fees or secure exclusive ticketing relationships first.
Counterargument to the trade: The market may already be ascribing low risk to Expedia: the stock's implied multiples are modest, and management has limited runway for rapid, material revenue re-shaping. If investors decide the ticketing opportunity is incremental and small relative to lodging, the stock may languish despite operational improvements. That outcome is plausible and would argue against allocating a large position.
Conclusion & what would change my mind
Stance: Long (tactical / position). The combination of durable profitability, a capacity to generate outsized incremental margin on new fee-based revenue, and a manageable valuation creates an asymmetric risk/return if Expedia materializes a credible ticketing push or signs a distribution deal with a major sports league. The trade is best sized as a portion of risk capital and monitored until the first evidence of monetization (take-rate uplift or incremental bookings tied to events).
What would change my mind:
- Definitive signs that ticketing/partnership conversations have failed or that the product generates negligible ARPU uplift after launch.
- Persistent quarter-to-quarter operating cash-flow weakness or a refinancing event that meaningfully increases cost of capital.
- Competitive exclusivity that prevents Expedia from accessing premium ticketing inventory or an adverse regulatory development affecting secondary-ticket fees.
If the confirmed catalyst arrives (league deal or strong early monetization metrics), I would move the stop up, take partial profits at the first target, and re-assess the second target in light of recurring revenue metrics and margin progression.
Disclosure: This is a trade idea for discussion and not personalized financial advice. Size positions according to your risk tolerance.