Fantastic interview with Barry Diller on the absurdity of guidance.
https://www.youtube.com/watch?v=HL3znM97fs8
Businesses and the economy operate in complex, dynamically changing environments. Management needs to adapt to those conditions not focus their energies on beating (or massaging) some short term make believe numbers. The long term quality and value of a business is rarely reflected in whether a company beats or misses its own short term forward numbers. Yet we have endless commentary and whole industries devoted to the crystal ball game. Sell-side and media reporting often make quarterly earnings outcomes the central evidence why a company is a good or bad investment... Getting your next quarter modelling 'correct' is the idiots game played by Sell-side, junior analysts and the less talented Buy-side investment houses. The few possible exceptions are the low volatility companies such as REITs and Infrastructure.
On a separate note, I studied Expedia in late April and decided it was a Buy at the price then of $57.25. The market structure was good: Expedia has a dominant position in North America and the global OTA market is fairly consolidated between Expedia, Booking.com and Trip.com (rational competition). The overall market is still growing towards online and OTAs are a permanent part of the Travel/Accommodation products distribution. The valuation was undemanding at mid teens LTM PE where I believed long term normalised EPS could grow >20% from: a) high single digit to low double digit Rev growth, and b) margin improvement to mid teens OPM. I really liked what Diller had to say in their 4Q19 earnings call: growing direct sales & User loyalty (reason for Booking.com's success), cost cutting wasteful marketing, simplifying operations. His response indicated he understood the reason and would tackle Expedia's lagging performance vs Booking.com. Dillers has a large % stake in Expedia and what he said and his past reputation made me believe that b) in particular, would be achievable regardless of the wider economic recovery.
I'm writing this and highlighted the above parts to illustrate what I believe are the central aspects of a good investment case. Next quarters' numbers don't feature at all within my considerations. Unfortunately the price ran away and I didn't chase it hard enough to get a position. But I did manage to build a big stake in Trip.com in the low $20s on a similar thesis.
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