Guggenheim: Expedia's Hiring Spree Is Tapering Off

Expedia Inc EXPE is a best idea heading into 2019, according to Guggenheim Securities.

The Analyst

Guggenheim analyst Jake Fuller maintains a Buy rating on Expedia with a $160 price target.

The Thesis

Expedia went on a hiring spree earlier in the year in support of a big hotel supply push, Fuller said in a Thursday note. (See his track record here.)

The online travel agency said it expected to invest around $50 million into the supply initiative.

The surge in hiring caused Expedia’s indirect sales and marketing expenses to outpace revenue growth through the first nine months, but the analyst said the hiring is beginning to slow down.

Job listings went from being 72 percent higher in the first quarter to down 31 percent so far in the fourth quarter, Fuller said. 

“Hires from early in the year should continue to be a Q4 headwind, but the dropoff in job listings bodes well for the [the first half of 2019] margin outlook,” the analyst said. “We continue to look for a 2019 EBITDA growth guide of 8-13 percent, but with increased comfort with potential indirect S&M with hiring activity slowing down.”

Guggenheim expects Expedia to extend its supply push into another set of markets in 2019, but said the initiative should be smaller than it was in 2018.

“The declines we are seeing in job listings would be indicative of that."

Price Action

Expedia shares were down 0.73 percent at $114.31 at the close Thursday. 

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