Online travel stock Expedia (EXPE) is near an agreement to sell a stake to private-equity firms Silver Lake and Apollo Global for at least $1 billion, according to a report from the Wall Street Journal.
If the deal does go ahead, it will represent Sliver Lake’s second large online travel investment this month. Not so long ago, on April 6, Silver Lake teamed up with Sixth Street Partners to invest $1B of debt and equity securities into Airbnb.
“While the deal is not complete, we see the potential investment providing a timely cash infusion for EXPE” writes Oppenheimer analyst Jed Kelly, who has a Hold rating on Expedia stock.
“Assuming a $3B outflow in deferred merchant bookings and a 25% hair-cut to ’19 fixed costs, we estimate EXPE has enough capital to last ~9 months under the current no bookings environment before requiring a capital raise” he said.
According to Kelly, Expedia’s VRBO should lead a gradual recovery for the company as domestic leisure is likely to be the first type of travel activity to return to business.
“However, in the next 18-24 months, the arc of EXPE’s recovery is going to be primarily driven by breakthroughs in COVID-19 testing and medical treatments, in our view” the analyst tells investors, adding that EXPE is set to becoming increasingly aggressive with its cost saving management plans.
Overall, EXPE shows a cautiously optimistic Moderate Buy analyst consensus on TipRanks with an average price target of $112. With the stock currently down 47% year-to-date, this price target indicates over 95% upside potential from current levels. (See Expedia stock analysis on TipRanks).
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