Analysts Changing Tune on Expedia After Earnings

By Paul Ausick Updated Jan 13, 1:12PM EST · Published Feb 14, 10:05AM EST

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Analysts Changing Tune on Expedia After Earnings — © Thinkstock

When Expedia Inc. (NASDAQ: EXPE) reported fourth-quarter results after markets closed on Wednesday, the shares opened 6% higher on Thursday and closed the day at $103.37, up about 9.6% since the Wednesday close. Not only did the travel company show solid organic growth, but the roughly $6 billion Expedia spent on acquisitions during 2015 are paying off.

Of particular interest to investors and analysts was the December acquisition of HomeAway, already the world’s largest vacation rental marketplace. The acquisition was viewed as a counter to the power of Airbnb, which is beginning to move into the online hotel booking business.

Analysts at Merrill Lynch raised their three-year price objective on Expedia from $125 to $135 with additional commentary:

We remain positive: 1) technology platform investment benefits driving strong room night growth; 2) potential Trivago margin improvement; 3) Orbitz/AWAY deal benefits and 4) Attractive FCF valuation (12x 2017E FCF). We also think there is plenty of opportunity to rationalize expenses following 2015 acquisitions. … Expedia is an investment in global Online travel with exposure to hotel, air and rental car bookings in the US, Europe and Asia. With several brands including Expedia.com, Orbitz.com, Hotels.com, Hotwire, and Wotif and its additional exposure to Asia through a joint venture with Air Asia, Expedia should benefit from an increasing percentage of travel bookings migrating Online. We expect 10- 20% growth in normal travel markets, and we see a 10-20x P/E multiple as reasonable.

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Other analyst calls and changes included:

Benchmark raised its price target to $132 with a Buy rating.
Credit Suisse cut its price target from $136 to $130 with a Neutral rating.
Deutsche Bank cut its price target from $154 to $142 and has a Buy rating on the stock.
Jefferies lowered its price target from $145 to $120 with a Hold rating.
JMP Securities cut its price target from $165 to $135 with a Market Outperform rating.
JPMorgan reduced its price target from $131 to $128 with a Neutral rating.
Raymond James cut its price target from $150 to $130 and rates the stock Outperform.
RBC cut its price target from $180 to $165 and has an Outperform rating on the stock.

Shares closed at $102.25 on Friday, down about 1% on the day. The stock’s 52-week trading range is $88.40 to $140.51 and the consensus price target is $132.83.

About the Author Paul Ausick →

Paul Ausick has been writing for a673b.bigscoots-temp.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.