This online travel agency could soar on AI tailwinds, Jefferies says

Expedia Group has room to run on several artificial intelligence-related tailwinds, according to Jefferies. The investment firm upgraded its rating for Expedia Group to buy from hold. It also hiked its price target on shares to $300 from $240, implying roughly 32% upside from Friday’s close. “We view AI as a potential tailwind to EXPE over time, allowing for improved recommendation engines, reduced customer acquisition costs, enhanced product velocity, and lower customer service costs,” Jefferies analyst John Colantuoni said Monday in a note to clients. AI development and adoption has grown over the past few years, sparking concerns that the emerging technology could disrupt internet stocks such as online travel agency Expedia. The companies have underperformed nearly every technology vertical, according to Jefferies, with internet stocks down roughly 30% since the beginning of the year, excluding megacaps. However, Expedia is one of several internet-linked names that is poised to benefit – rather than suffer- from the ongoing proliferation of AI tools, per the investment firm. “We think that LLMs will eventually become another performance marketing channel that could accelerate share consolidation around the most scaled Internet names,” Colantuoni wrote. He added, “we expect AI agents to provide consumers a smaller, more personalized list of search results that reduces the opportunity for unpaid listings, allowing advertisers with the greatest capacity for performance marketing to capture a disproportionate share of traffic acquisition. We think this opportunity is particularly acute for [online travel agencies], given the hotel industry is generally too fragmented to compete with their marketing scale and has historically invested a comparably small amount in marketing.” The analyst also noted that Expedia has benefited more broadly from a series of key product investments over the past two years, in addition to a refresh of management priorities. Those efforts have “laid the foundation for EXPE to deliver more sustainable growth,” Colantuoni said in his note. Jefferies’ call goes against consensus on Wall Street. Of the 38 analysts covering Expedia, just 15 have a buy or strong buy on the stock. Shares have plunged 20% since the beginning of the year, underperforming the overall market.