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Key Points
- Expedia shares more than doubled between April and January after a series of strong earnings reports, but the stock became volatile heading into its fourth-quarter results and fell further after the report as investors reacted to expectations for slower margin expansion.
- Analyst sentiment remains mixed, with the stock trading below its recent highs even as the average price target suggests roughly 17% upside.
- Expedia’s strong balance sheet, growing B2B business, and continued travel demand support the bullish case, but rising short interest, macroeconomic uncertainty, and concerns about margin growth suggest the stock could remain volatile even if the long-term outlook remains positive.
- Special Report: Nothing will create greater fortunes than this convergence
Shares of online travel company Expedia Group (NASDAQ: EXPE) have hit some turbulence. After more than doubling over the past year as the company delivered several quarters of strong results, the stock soared to a 52-week high in January.
Soon after, however, shares began to pull back. The decline accelerated after the company released its fourth-quarter 2025 earnings on Feb. 12, and although the stock has regained some ground since then, trading remains volatile. That has left investors wondering whether the drop from its highs is a buying opportunity or a sign the rally has run out of steam.
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Mixed Signals Leave Investors Uncertain
Investors are getting mixed signals about where Expedia's stock could go next. On the positive side, price targets point to meaningful upside from current levels, and valuation metrics suggest the stock may still be undervalued.
News that OpenAI ditched plans to move directly into travel bookings also eased concerns over potential disruptions to online travel agencies.
The company's fundamentals remain solid, with strong growth in its B2B and advertising businesses, which management expects to continue into 2026.
The balance sheet is also in good shape, with more than $5 billion in cash and manageable debt levels.
However, there are reasons for caution. Macroeconomic pressures, including geopolitical tensions, higher fuel prices, and weak consumer sentiment, could weigh on travel demand. There are also concerns about Expedia's margin growth in the year ahead.
Strong Earnings Fueled the 2025 Rally
A new wave of enthusiasm for Expedia began following the company's better-than-expected second-quarter 2025 earnings report, which saw the company return to profitability amid strong bookings and advertising revenue. The consumer segment, which had previously experienced weakness, also began to stabilize.
After the third-quarter earnings report, momentum really accelerated. Wall Street applauded another quarter that surpassed expectations, with continued growth across Expedia's business segments. Shares, which had already climbed about 68% between April and the release of the Q3 results, rose more than 20% in the two days following the report, prompting a wave of analysts to raise their price targets. The rally continued through the end of 2025, with the stock gaining another 38% before reaching an all-time high of $303 on Jan. 9.
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Profit Taking and Margin Concerns Trigger Pullback
After hitting its peak, momentum began to fade. Amid some profit-taking after the strong run, the decline accelerated after Expedia released its fourth-quarter earnings, even though the company posted double-digit growth in bookings and revenue and beat analyst expectations.
Expedia also issued optimistic guidance for 2026. However, investors appeared to focus on the company's expectation that earnings before interest, taxes, depreciation, and amortization (EBITDA) margin expansion would be more moderate than the prior year. The more cautious margin outlook sent shares down roughly 12% in the sessions following the release.
There's a case to be made that the stock could start to move higher. Although analyst sentiment is mixed, with 22 Hold ratings and 13 Buy ratings, the average 12-month price target is about $281, suggesting roughly 17% upside from recent prices near $240.
Valuation Suggests Expedia May Still Be Cheap
Even with shares up more than 45% over the past year, the stock may be undervalued compared to peers. Expedia's price-to-earnings growth (PEG) ratio of about 0.71 is lower than that of several companies in the space. Booking Holdings Inc. (NASDAQ: BKNG) has a PEG ratio of 0.97, while Airbnb Inc. (NASDAQ: ABNB) has a PEG of 1.55.
Expedia also trades at a lower price-to-sales (P/S) ratio of about 2.01, compared with roughly 5.22 for Booking and 6.55 for Airbnb, and far below the broader internet commerce industry, which has an average P/S ratio near 26. The company's price-to-earnings ratio of about 24.5 is lower than both Booking's and Airbnb's, at 26.7 and 32.7, respectively, though slightly above the industry average of around 20.4.
Volatility Likely to Continue Despite Upside Potential
Still, valuation does not eliminate the risks. Macroeconomic uncertainty remains a key concern. It is unclear how geopolitical tensions in the Middle East and rising fuel costs could affect travel demand, and weak consumer sentiment, particularly among budget-conscious travelers, could weigh on bookings if economic conditions soften.
Short interest has also been trending higher. About 7.4% of Expedia's float is currently sold short, the highest level since June 2021, suggesting a growing number of investors are betting the stock could face further downside.
Taken together, Expedia's outlook remains mixed.
The company continues to show solid fundamental growth, its valuation looks attractive, and analyst price targets suggest upside. At the same time, slower margin expansion, macroeconomic uncertainty, the stock's sharp run over the past year, and rising short interest could keep trading volatile in the near term. For investors willing to tolerate that volatility, the recent pullback may offer an opportunity, but the path forward for Expedia stock is unlikely to be smooth.
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