Expedia Climbs 4% on Analyst Upgrade

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Shares of Expedia Inc. (EXPE) jumped over 4%, touching a high of $77.86, before closing a notch lower at $77.62, following an upgrade from neutral to positive by the investment firm Susquehanna Financial Group. In addition, the Susquehanna analyst Brian Nowak increased the price target on the stock to $90.00 (from $79.00).

Susquehanna anticipates improvement in three major segments, Travelocity, Trivago and the core business of the global online travel agency. The analyst noted a rise in traffic conversions for Expedia and observed that traffic for Trivago metasearch travel continued to gain momentum, growing nearly 85% on a year-over-year basis.

Furthermore, Travelocity also witnessed a significant improvement in its traffic conversion rate following its tie-up with Expedia. Additionally, growth continues to accelerate at core Expedia online sites including Expedia.com and Hotels.com.

Therefore, Nowak anticipates Expedia’s core business to witness EBITDA growth of 8% in 2014 and 10% in 2015. In addition, Susquehanna raised 2015 earnings per share estimate by 5%, while 2014 estimates remained unchanged.

Furthermore, FBR Capital Markets analyst Jake Fuller remained bullish and reiterated an outperform rating on the stock, setting the price target at $85.00. The analyst’s bullish stance is aided by strong growth in domestic room night bookings, which is expected to position the company well in the upcoming quarter. Moreover, the analyst is positive about Expedia’s shift of focus towards the expansion of its hotel base.

The U.S. online travel segment is increasing at a slower pace compared to other markets such as Europe, Latin America and the Asia-Pacific. However, it continues to be the leader in terms of online travel sales and is expected to hold its position at least for the coming few years.

Expedia is one of the leading online travel companies in the world and has a large share in the U.S OTA market. The company reported decent first-quarter results, with revenues of $1.20 billion increasing 4.2% sequentially and 18.6% year over year.  While growth rates across most brands were healthy, Expedia, Trivago and Hotels.com were strongest.

Moreover, Expedia has been trying to strengthen its competitive position in the online booking space by introducing new features and updating products on a continuous basis. It recently announced that it will allow users to pay for hotel accommodations using bitcoin. The addition of the bitcoin platform will not only boost the whole process of online payment for hotel accommodations but also help the company better compete with the likes of Priceline.com (PCLN), Ctrip.com International (CTRP)  and Orbitz Worldwide (OWW ).

Currently, Expedia has a Zacks Rank #3 (Hold).
 

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