Is Expedia Still A Buy? Wall Street Analysts Weigh In

Shares of Expedia Inc (NASDAQ: EXPE) were up about 10 percent on Friday after the company announced its second-quarter financial results. Earnings came in at $0.89 per share, ahead of the Street’s consensus of $0.85 per share, on revenue of $1.654 billion, versus expectations for $1.661 billion.

Following the report, a few Wall Street research firms weighed in on the company.

Piper Jaffray

On Friday, analysts Michael J. Olson and Samuel J. Kemp reiterated a Neutral rating, raising their price target from $102.00 to $105.00, as strong results confirm continued vigor in underlying travel markets. They highlight two figures from the results: bookings of $15.1 billion and adjusted EBITDA of $281 million – both above consensus estimates of $14.55 billion and $270 million; Note that these results exclude eLong.

Other important numbers include: steady room night growth of approximately 27.5 percent year-over-year, and fiscal 2015 guidance for EBITDA growth in the 10 to 15 percent range.

The analysts conclude that, “Expedia has a clear near-term runway based on solid worldwide travel fundamentals and acquisitions (Travelocity & Orbitz) driving revenue growth and cost synergies. The company will face tough comps in 2H'16 (assuming 2H'15 close of Orbitz) and the ‘optics’ of the numbers will begin to worsen at that point, but investors will not likely focus on these issues until late '15 or early '16.”

Deutsche Bank

Analysts at Deutsche Bank seem more bullish, as they reiterated a Buy rating, while boosting their price target from $130.00 to $135.00. They assure they would add to positions after Thursday’s print and continue to think Expedia is well positioned for 2016 and beyond.

The analysts also comment that strong second-quarter results prove the core business momentum is strong, and increase the efficacy of the company’s acquisition strategy. They note that, one year in, Travelocity continues to grow at a nice pace, making them “more confident Expedia can see upside from Wotif, AirAsia and eventually Orbitz. Press reports suggesting the Orbitz deal is on track further bolster the bull case." Finally, “room night growth accelerated in the US and the 2-year accelerated in int'l ex-acquisitions.”

Cowen & Co.

Analysts Kevin Kopelman and Andrew Marok are also positive on the company, and reiterated an Outperform rating, while increasing their price target from $130.00 to $135.00.

The analysts also highlight the acceleration of room night growth to +28 percent organic in the quarter. They remark hotel supply, repeat customers, conversion, and ad spend as the main growth drivers here.

On the other hand, they notice that margins fell 40 bps, as improvements at Trivago and Egencia partially offset “modest compression at Core OTA & corp. overhead.”

Cantor Fitzgerald

Finally, analysts at Cantor reiterated a Buy rating on shares of Expedia, and raised their price target from $120.00 to $130.00. The better-than-expected results were driven strength in organic room nights growth and see this “as a sign that the company's efforts in driving conversions and bookings (through a combination of improved product offerings, promotions, loyalty and a growing property selection) are working well, enabling it to grow faster than the overall market.”

The experts continue to believe Wotif and Travelocity can deliver upside as they get optimized for performance, after their integration with Expedia.

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