Rosenblatt initiates Expedia stock coverage with neutral rating

Rosenblatt initiated coverage of Expedia (EXPE) with a Neutral rating and a $360 price target (vs InvestingPro fair value $365) on the back of a turnaround and improving fundamentals, including a 90% gross profit margin. The firm flagged slowing bookings growth, guiding 3Q bookings to 5%-7% YoY versus 12% previously, while noting near-term support from domestic travel trends. Recent strength also underpins analyst optimism: 2Q26 gross bookings rose 12% YoY to $33.9B and revenue increased 14% to $4.32B, with adjusted EBITDA up 23% to $1.12B (margin +196bps to 25.9%), prompting multiple target raises.

Analysis

EXPE is entering the part of the cycle where the stock trades less on beat/raise optics and more on whether the turnaround can sustain revision momentum as growth normalizes. That favors the name tactically: margin expansion and ad/B2B mix are higher-quality earnings than raw bookings acceleration, so the next leg is likely multiple stability rather than a step-change rerating. The key second-order winner is the broader travel ad ecosystem if Expedia keeps taking share with lower paid-search intensity; the loser is any competitor that needs to keep feeding Google-like traffic to defend volume.

The structural risk is AI disintermediation, and it matters most over 6-18 months rather than the next print. Expedia’s consumer funnel is relatively easy for AI agents and metasearch to compress, so any softness in repeat intent or traffic acquisition costs would show up first in conversion efficiency, then in margin. In the next 1-3 months, the stock is most vulnerable if domestic demand merely stays "good" while guidance steps down further; that would turn the current positive estimate revisions into a ceiling on valuation.

Consensus may be overconfident that the business mix shift is enough to offset slower top-line momentum. The better way to express the view is relative quality: EXPE can keep grinding higher if revisions continue, but BKNG still screens as the cleaner moat/scale compounder if travel demand stays firm. Falsifier for the bullish case is any evidence that bookings growth slips below the guided range or that marketing efficiency deteriorates as AI-driven search changes traffic economics.

Key Decisions for Investors

• Tactically long EXPE on pullbacks near the low-$300s for a 1-3 month trade, targeting the mid-$340s to $360 area; cut the position if forward bookings guidance is revised below 5% or if next quarter shows margin giveback.
• Prefer a relative-value pair: long BKNG / short EXPE into the next several weeks to express travel demand without paying for a less durable moat; this works if the market starts rewarding scale and international mix over turnaround optics.
• Use EXPE as a covered-call candidate rather than a momentum long: monetize elevated post-earnings optimism with upside capped into the next quarter, since decelerating growth makes multiple expansion harder to sustain.
• Set a watch item on AI-led travel search traffic and paid-search CPCs; if traffic costs rise or referral mix weakens, rotate from outright long exposure to a hedged or short setup over 6-18 months.