Expedia (EXPE) Has Position, Strength to Continue Growth in 2011
Tweet
Share
E-mailGet Alerts EXPE Hot Sheet
Join SI Premium – FREE
Shares of Expedia (Nasdaq: EXPE) have made a nice comeback following recent lows of $19.00 at the start of December, rising 17.2% to $22.26 at the close yesterday. However, amid travel delays on the East Cost of the U.S. stemming from rough winter weather over the weekend, shares may still have some room to run, according to Barron's.
Expedia may have the wherewithal to do it too...for a near three-month stretch in 2010, shares rocketed 63% to $29.85 from mid-July to mid-September.
Some may be pricing in fear that Google (Nasdaq: GOOG) may enter the online travel market. Google tends to attract attention in nearly every venture that it undertakes.
With shares down 4% over the last 52-weeks, and trading at a 13x forward P/E, Barron's notes that the valuation is low considering that it is the leader in the market. Growth prospects also call for a 16% boost in 2011, and management at the company is solid. Expedia's dividend yields 1.1% currently, and has a track record of buying back shares.
Expedia may have its hands in more than most realize; they carry a stake in Hotels.com, Hotwire.com, TripAdvisor, Egencia, Europe-focused Venere.com, Classic Vacations, and Chinese eLong.com. Opportunity is there to grow their European business, Barron's notes.
Recently, American Airlines, of AMR Corp. (NYSE: AMR) pulled their listings off of competitor Orbitz Worldwide's (NYSE: OWW) website, hinting that airlines may try to take bigger control over online travel agencies.
According to a filing in November, "Orbitz released a plan by American's parent company, AMR Corp. (AMR), to stop providing Orbitz with fare data unless it agreed to get its flight and fare information directly from the airline instead of through a global distribution system, or GDS, such as Sabre, Galileo or Worldspan." A direct link would allow airlines to more closely monitor how the flights were doing and also be able to keep the most profitable tickets to sell themselves. The break off of American from Orbitz highlights the failure to reach an agreement on American's request.
Because Expedia only derives 12% of their revs from airlines (compared to 36% for Orbitz), one analyst estimates that if 50% of airlines dropped from the site, it would only affect EPS by $0.10. Expedia gets 63% of revs from hotels, and 25% from ads, car rentals, and other items.
Turning back to Google, their entrance into the online travel-booking realm will come with the acquisition of ITA Software. ITA provides flight data, schedules, fares and availability to online travel agencies, and the industry fears that if Google gets a hold of it, they will be able to supersede other travel sites by being able to directly link to airlines' offerings when users search for flights. However, some are unconvinced that Google will provide such a challenge, as their specialty is search and not eCommerce. One analyst cites Google's inability to complete with Zillow in real estate.
Another concern that analysts have coming out of the recession is whether or not Expedia will be allocated the same amount of rooms, which would put a hit on the largest part of their revs. So far, the fear hasn't played out, and revenues have increased because lower inventory has been offset by higher prices.
Legg Mason says that the market hasn't factored in three things that they like about the shares: 1) its well-rounded chief executive, Dara Khosrowshahi; 2) its astute mastery of capital allocation, including buybacks and smart acquisitions; 3) its ability to grow in Europe to compete with Priceline's highly successful Booking.com.
Shares of Expedia are up 0.5% today.
Expedia may have the wherewithal to do it too...for a near three-month stretch in 2010, shares rocketed 63% to $29.85 from mid-July to mid-September.
Some may be pricing in fear that Google (Nasdaq: GOOG) may enter the online travel market. Google tends to attract attention in nearly every venture that it undertakes.
With shares down 4% over the last 52-weeks, and trading at a 13x forward P/E, Barron's notes that the valuation is low considering that it is the leader in the market. Growth prospects also call for a 16% boost in 2011, and management at the company is solid. Expedia's dividend yields 1.1% currently, and has a track record of buying back shares.
Expedia may have its hands in more than most realize; they carry a stake in Hotels.com, Hotwire.com, TripAdvisor, Egencia, Europe-focused Venere.com, Classic Vacations, and Chinese eLong.com. Opportunity is there to grow their European business, Barron's notes.
Recently, American Airlines, of AMR Corp. (NYSE: AMR) pulled their listings off of competitor Orbitz Worldwide's (NYSE: OWW) website, hinting that airlines may try to take bigger control over online travel agencies.
According to a filing in November, "Orbitz released a plan by American's parent company, AMR Corp. (AMR), to stop providing Orbitz with fare data unless it agreed to get its flight and fare information directly from the airline instead of through a global distribution system, or GDS, such as Sabre, Galileo or Worldspan." A direct link would allow airlines to more closely monitor how the flights were doing and also be able to keep the most profitable tickets to sell themselves. The break off of American from Orbitz highlights the failure to reach an agreement on American's request.
Because Expedia only derives 12% of their revs from airlines (compared to 36% for Orbitz), one analyst estimates that if 50% of airlines dropped from the site, it would only affect EPS by $0.10. Expedia gets 63% of revs from hotels, and 25% from ads, car rentals, and other items.
Turning back to Google, their entrance into the online travel-booking realm will come with the acquisition of ITA Software. ITA provides flight data, schedules, fares and availability to online travel agencies, and the industry fears that if Google gets a hold of it, they will be able to supersede other travel sites by being able to directly link to airlines' offerings when users search for flights. However, some are unconvinced that Google will provide such a challenge, as their specialty is search and not eCommerce. One analyst cites Google's inability to complete with Zillow in real estate.
Another concern that analysts have coming out of the recession is whether or not Expedia will be allocated the same amount of rooms, which would put a hit on the largest part of their revs. So far, the fear hasn't played out, and revenues have increased because lower inventory has been offset by higher prices.
Legg Mason says that the market hasn't factored in three things that they like about the shares: 1) its well-rounded chief executive, Dara Khosrowshahi; 2) its astute mastery of capital allocation, including buybacks and smart acquisitions; 3) its ability to grow in Europe to compete with Priceline's highly successful Booking.com.
Shares of Expedia are up 0.5% today.
Are you missing key trading opportunities? Upgrade to StreetInsider Premium and get a step ahead of the market - FREE TRIAL!
Create E-mail Alert Related Categories
Insiders' BlogRelated Entities
Barron's, Dividend, Life, Style and Real EstateSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
