EXPE - Why Expedia stock could be a cyclical darling for investors in 2024
2024-02-06 08:20:12 ET
2024 is shaping up to be an exciting year for stock markets. The US economy is strengthening, as the recent payroll numbers suggest. As such, it could be an interesting year for cyclical stocks like Expedia Group Plc. (NASDAQ:EXPE). The stock is up 27% in the past year, and there are indications that the positive momentum could continue.
Cyclical stocks move with the state of the economy. The gain in value during economic expansions and fall during challenging times. As a travel technology company, Expedia finds itself in this mix. The company operates several travel websites and witnesses fewer bookings during economic downturns. This was evident during COVID-19, forcing its stock to a low of slightly above $40 in April 2020. The stock now trades at $151, nearly four times, indicating that things are turning up.
A cyclical stock like Expedia will be of interest to investors in 2024. In his latest note to investors, Fundstrat’s analyst Tom Lee expects stocks to be resilient in 2024. In fact, the analyst projects the S&P 500 index will hit a new record this year. He specifically mentions the clearing inflation and robust job market. As such, the US Federal Reserve is expected to tone down on rate hikes, boosting stocks.
So far, the Fed hasn’t indicated when exactly it will start cutting down rates. Instead, it has intimated to its 2% inflation target goal. However, markets are pricing for a less hawkish move, with stock indexes shifting to positive territory. As such, the major discussion hasn’t been about the state of the economy or rate cuts. It has been about whether the corporate earnings match the expected price moves. Expedia has perfectly aligned with this shift.
In Q2 earnings, the travel company posted record revenues and the highest-ever second-quarter bookings. The results were replicated in Q3, with a new quarter record revenue of $3.9(£3.09) billion. The company also posted a record-adjusted EBITDA. The results are expected to be replicated when the company reports earnings on February 8 after market close. Clearly, Expedia’s business is booming and, coupled with the general economic health, is poised to gain.
Expedia technical analysis – stock hits resistance at $151
Technically, Expedia has a lot of buying interest as the RSI holds at an overbought zone. The stock cleared the $121 level but found another resistance at $151. A potential correction could occur before further surges.
Should you buy Expedia stock?
Expedia stock remains attractive in 2024 due to the favourable macro factors and the company’s fundamentals. The Q4 earnings will be a barometer for the stock, but indicators are positive it will maintain strengths. A possible correction/breakout at the $151 resistance could open up buying opportunities.
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