Expedia Group, Inc. (EXPE) has opened Thursday's session sharply lower after a nightmare third quarter in which the travel giant missed profit and revenue estimates by wide margins. Revenues rose a paltry 2.8% year over year, highlighting growing alternatives to the company's near-monopoly, as well as competitive pricing at hotel, airlines, and car rental sites. Executives added to sell-off intensity during the conference call, lowering guidance for 2019 EBITDA growth to a new range of 5% to 8% from the previous forecast of 12% to 15%. Analysts took note of these routs, with quick downgrades at Piper Jaffray, BofA/Merrill, and DA Davidson.
Expedia stock is now trading below the 200-day exponential moving average (EMA) for the first time since June and has violated support at the December 2018 and May 2019 lows. A confirmed breakdown would greatly deteriorate the long-term technical outlook, raising the odds that the decline will reach deep support at the 2016 low in the upper $80s. More importantly, that bearish action would complete a topping pattern that ends the decade-long uptrend.
EXPE Long-Term Chart (2005 – 2019)
The company came public at $27.50 in July 2005 in a spin-off from IAC/InterActiveCorp (IAC), parent company of Dotdash and Investopedia. The opening print marked the high, ahead of a shallow decline that found support in the upper teens in October. The subsequent uptick failed at the prior peak, generating a steeper downdraft that bottomed out in the upper teens in the third quarter of 2006.
A rally into October 2007 posted a new high in the mid-$30s, ahead of a steady downtick that accelerated to an all-time low in the deep single digits after the 2008 economic collapse. It bounced back to the IPO opening print at the end of 2009 and eased into a trading range that contained the upside into a 2012 breakout that attracted broad-based buying interest. The stock posted impressive gains for the next four years, finally topping out at $130 in the first quarter of 2016.
A May 2017 test at range resistance yielded a rally that posted an all-time high at $161 in August, while the subsequent decline failed the breakout in October, reinforcing resistance near $140. The stock struggled into the fourth quarter of this year, printing two failed rally attempts as well as a series of higher lows. This price action carved a contracting pattern with resistance at that level and support at $120 that was broken at the opening bell.
The monthly stochastics oscillator crossed into a long-term sell cycle after the news, predicting continued weakness that could bring the 2016 lows into play, with that level marking the last line of defense against a breakdown that signals the start of a multi-year downtrend. It may already be too late because it also broke the 50-month EMA this morning, which has marked deep support for the past 10 years.
EXPE Short-Term Chart (2017 – 2019)
The on-balance volume (OBV) accumulation-distribution indicator posted an all-time high with price in August 2017 and turned lower in a persistent distribution phase that paused in the first quarter of 2018. Limp buying power failed a few months later, giving way to a sideways chop that signaled a balance between bulls and bears. That stalemate has now ended, with a sharp increase in OBV selling power likely to reach 2018 and 2019 lows in the coming weeks.
There's little good news for bulls in current price action, with the stock now trading more than 20% lower than Wednesday's closing print. The psychological $100 level should offer short-term relief in the coming sessions, but stocks that fall this hard and this fast rarely recover quickly because momentum-fueled price action traps a large supply of shareholders who will use any uptick to jump ship and cut losses.
The Bottom Line
Expedia stock is in freefall after a weak third quarter and reduced guidance gave up the last of 2019's modest gains.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.