Read This Before You Book A Hotel
Dear Rundown Reader,
On Friday we looked at Twitter (NYSE: TWTR) and Tesla (NASDAQ: TSLA) to show how an earnings report can shoot a stock through the roof in hours, or turn a down day into a nightmare.
Today we look at how bad earnings, in the case of travel booking site Expedia (NASDAQ: EXPE), can reveal interesting secrets about a business.
But first an interesting letter from a Rundown reader who once worked in the movie business:
“Elon Musk reminds me of the directors who when given an inch would take a mile. Sometimes they were visionaries and sometimes they hallucinated. Some of their best work would come when they were limited by a strict budget and had to fight to execute their ideas.”
Even genius needs discipline. Even great stories need results at the end. Is patience running out in Musk’s vision? He did just put a car in space, you know.
Your Rundown for Monday, February 12, 2018…
Expedia Had An Interesting Week… Here’s What’s Next
In 1996, a small subdivision of Microsoft Inc. launched a website in hopes of capturing internet magic and changing the world of travel booking forever.
In 1999 that subdivision became Expedia (NASDAQ: EXPE).
By 2008, Fortune named Expedia its third most admired company.
Today, Expedia owns and operates several brands including Hotels.com, Hotwire.com, Trivago, Travelocity, and Orbitz.
The company operates in dozens of countries, and lists upwards of 350,000 hotels and 500 airlines on its various websites.
The company has been a strong, steady earner for years.
But last Friday, Expedia’s fourth quarter report fell well below analyst expectations and shares went on a tumble.
By the end of the day it was the S&P’s biggest loser falling 18% as reported by Barron’s.
What went wrong?
Yahoo Finance cites higher expenses as the reason for Expedia’s poor Q4 earnings as market costs rose 16%.
The rise in costs is attributed to increased marketing efforts needed to fight off competitor influence.
This, especially with regards to increased pressure from hotel direct-booking campaigns, as reported by Hotel Management.
But tech investments have also drained fourth quarter revenue.
Investor Business Daily reports investments in cloud infrastructure and other R&D projects are directly attributable to the company’s increased Q4 losses, “as it battles for market share against Priceline (PCLN) and others.”
Speaking in a recent press release, EXPE CEO Mark Okerstrom noted:
“Over the past several months, we have made key organizational changes, aligned our company around common objectives and began executing on a new direction aimed at accelerating the geographic expansion of our global travel platform.”
Yes, EXPE’s poor report is an exception to the norm.
Market Insider reports that Jefferies analysts Brent Thill believes:
“The company is undergoing a ‘painful but necessary transition’ to higher earnings growth.”
Morgan Stanley analyst Brian Novak speaking in a Reuters report states:
“We acknowledge Expedia is now likely to be a show-me story until the second and the third quarter… but we remain ”overweight“ and are buyers of (the stock).”
Takeaway: If you believe the spin, short term pain means long term strength.
That’s discipline. That’s positioning a business for the future.
EXPE’s week last week is a good example of how a company can take its medicine with a bad earnings report and keep the focus on the future.
Will it work? It’ll be interesting to watch.
Now, turning to the markets this morning…
Market Rundown for Mon., February 12
S&P 500 futures are up 28.75 or 1.10% this morning at 2,647.
That imperfect measure of fear and uncertainty, the VIX, is down 7.07 or 21.13% at 26.39 this morning.
Will traders today be 21% less uncertain than they were on Friday?
Or is volatility here to stay for the near-term?
Oil’s back in the green, up $1.03 this morning at $60.23.
Gold’s up $5.20 at $1,320.
In the second week of December, gold traded for $1,248.
That’s a not insignificant move for gold in two months. Just saying.
CoinDesk has a Bitcoin at $8,661 this morning, up 7.32% in the last 24 hours.
One month ago, Bitcoin was at $14,188.
One year ago, Bitcoin was at $996.
Five years ago, Bitcoin was at $26.05.
Let’s put that in perspective.
The S&P 500 will open around 2,647 this morning.
Five years ago, the S&P 500 was at 1,519.
Fortune favors the patient.
We’ll talk again on Wednesday.
For the Rundown,