Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

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Expedia (EXPE) Proves Travel is dead

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The Expedia Group (EXPE) proves the travel industry is dead. Expedia’s revenue growth shrank by 82.05% in the quarter ending on June 30, 2020.

Moreover, Expedia’s quarterly gross profit fell from $2.143 billion on 31 December 2019 to $1.58 billion on 31 March 2020 to $177 on 30 June 2020. Additionally, Expedia (EXPE) began 2020 with a $120 million operating income on 31 December 2020.

Expedia reported a quarterly operating loss of -$1.479 billion on 31 March 2020 and a quarterly operating loss of -$849 million on 30 June 2020. Dramatically, Expedia’s quarterly revenues fell from $2.747 billion on 31 December 2019 to $2.209 billion on 31 March 2020 to $566 billion on 30 June 2020.

Therefore, I calculate over four-fifths of Expedia’s revenues disappeared in six months. To explain one fight of $2.747 billion is $549.40 million.

Travel Dies at Expedia

Expedia’s revenue collapse is concurrent with the coronavirus pandemic and travel restrictions. For instance, Americans cannot travel to the European Union, Japan, and Canada.

Moreover, travel restrictions are growing as coronavirus surges again. For example, the United Kingdom will ban all leisure travel between 5 November and 2 December 2020, One Mile at a Time reports. The leisure travel ban is on top of a 14-day quarantine on American travelers to the UK.

Thus, normal business or leisure travel is impossible in most of the world. Hence, Expedia’s business no longer exists.

Is Expedia Dead?

Expedia (NASDAQ: EXPE) could be dead because its business is travel.

For example, Expedia operated over 200 travel booking sites in over 70 countries in 2018. Expedia claimed to offer one million properties, over 500 airlines, over 35,000 activities, over 175 car hire companies, dozens of cruise lines, and over 1.8 million vacation rental listings in 2018.

Expedia reported $99.7 billion in bookings in 2018. Expedia booked 352 million room nights in 2018. Expedia claims that over users booked one-in-three of its transactions on a mobile device in 2018.

Expedia’s portfolio includes HomeAway, Orbitz, Vrbo, Expedia, Hotels.com, Hotwire, EGENCIA, Travelocity, ebookers, wotif, CheapTickets, Expedia Group Local Expert, CarRentals.com Expedia Media Solutions, Expedia Lodging Partner Group, Expedia Cruises, Classic Vacations, Silver Rail, and Travelldoo.

Expedia’s business is booking rental cars, airline flights, cruises, hotel rooms, vacation rentals, and train tickets. That business no longer exists because there is no place for people to travel.

Can Expedia (EXPE) make money?

Expedia (EXPE) could be incapable of making money in the present environment. For instance, Expedia’s quarterly operating cash flow fell from $341 million on 31 December 2020 to -$784 million on 31 March 21, 2020 to -$1.846 billion on 30 June 2020.

To stay in operating Expedia is borrowing money. Expedia reported a quarterly financing cash flow of $1.517 billion on 31 March 2020 that grew to $3.816 billion on 30 June 2020.

However, Expedia had $6.786 billion in cash and short-term investments on 30 June 2020. That number grew from $4.912 billion on 31 March 2020. Unfortunately, I think Expedia borrowed much of that cash and short-term investments.

Expedia is Incapable of Making Money

I conclude that Expedia (NASDAQ: EXPE) is incapable of making money in the present environment of coronavirus restrictions. Therefore, Expedia could collapse within the next year if the pandemic does not end.

Hence, I think nothing could save Expedia – not even a vaccine. To explain, I think it will take several months to manufacture and distribute enough vaccine for everybody. Thus, it could take over a year for a vaccine’s effects to contain coronavirus. By then I think Expedia will be in bankruptcy because people will not have travelled for over a year.

Consequently, I think Mr. Market overpriced Expedia shares at $98.80 on 3 November 2020. Additionally, I think Mr. Market fails to acknowledge the reality of coronavirus because Expedia’s stock was $110.98 on 2 January 2020.

Why Expedia Will Collapse

Expedia’s share price shows Mr. Market denies the reality that travel companies cannot make money. I think Mr. Market’s reality denial is setting Expedia’s share price up to for total collapse.

For example, investors could pay $95 a share on Monday, in expectation of a speedy end to coronavirus. On Tuesday, Expedia runs out of cash and declares bankruptcy. On Wednesday, Expedia’s shares will fall to under $10.

Expedia’s overpriced shares show why investors need to avoid travel-related stocks. Travel companies cannot make money in a pandemic. Furthermore, it could be years after a pandemic before travel revives.

The data shows that an airline recovery is improbable. The volume of international air travel could fall from 4.5 billion passengers in 2019 to 2.3 billion in 2020, CNN Business estimates. Airline industry insiders do not expect air travel to return to the 2019 level until 2024.

If the airline industry insiders are correct, travel will not recover in time to save Expedia Group Inc. (EXPE). Therefore, investors and speculators need to avoid stocks such as Expedia unless they are seeking shares to short.