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Expedia Analysts Grow More Bullish After Strong Earnings

Catherine Larkin
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Expedia Analysts Grow More Bullish After Strong Earnings

(Bloomberg) -- Expedia Group Inc.’s fourth-quarter earnings beat and better-than-expected Ebitda forecast were met with cheers and price-target increases across Wall Street. While growth in Expedia’s home rental service disappointed, the company made up for it with strength in its core platform. The shares rose 3.7 percent at 9:56 a.m. in New York, poised for their fifth gain in six sessions. Cowen also sees positive read-through to peers Booking Holdings Inc. and TripAdvisor Inc., which report later this month.

Here’s what analysts are saying:

Cowen, Kevin Kopelman

“The company’s surprisingly strong 19E EBITDA guide of +10-15% put the low end of the range near where consensus was.”

“HomeAway was the major disappointment” in the fourth quarter and the lack of prior warning from management suggested it must have started to deteriorate at the end of the year, after third-quarter results. “While worse than expected, the slowdown is not terribly surprising given trends in recent quarters,” Kopelman wrote.

Cowen sees positive read-through to Booking’s results, expected Feb. 27. The firm highlighted the positive ad ROI environment as well as Expedia’s stable nights growth, which should ease concerns about industry growth and about Expedia posing a major threat to Booking in international markets in the near term. There’s also less risk of negative surprise in TripAdvisor’s results, due Feb. 12.

Raises price target on Expedia to $145 from $135, rates outperform

Deutsche Bank, Lloyd Walmsley

“Guidance for 2019 EBITDA growth of +10-15% was nicely ahead of expectations and comes despite 4ppts headwind from Cloud and a disappointing outlook at HomeAway, where growth is slowing sharply.”

Deutsche Bank expects room nights to see a slight slowdown in the first quarter with a late Easter, then bouncing back in the second quarter.

Reiterates buy rating

Piper Jaffray, Michael Olson

“It appears Expedia has reached a point where visibility has improved relative to both topline trends and ongoing spending initiatives.”

“Despite spend on new inventory and marketing, Expedia expects FY19 EBITDA growth of 10-15%, which is fractionally above consensus. For 2019, we expect Expedia will look to maintain a relatively even balance between growth and investments.”

Rates overweight, raises price target to $165 from $150

Benchmark, Daniel Kurnos

“2019 EBITDA guidance of 10-15% y/y growth seems eminently achievable, while even the low-end of the range, which would likely be a trade-off for better revenue growth, would still keep the 2019 EBITDA multiple at around 10x.”

“We acknowledge the shares continue to look inexpensive at current levels and that Expedia, of the two major players, has significantly more runway for growth as they continue to play catch-up.”

Rates hold

Wedbush, James Hardiman

Wedbush expects to see a “significant boost” in the stock price Friday after a “big 4Q beat” and encouraging forecast. Hardiman said “more efficient use of selling and marketing expenses in the quarter” helped drive the upside.

“EXPE’s recent history of conservatism would suggest that if all goes as planned, the company is likely to meet or exceed the high-end of the guidance range.”

Rates neutral, raises price target to $137 from $125

Goldman Sachs, Heath Terry

“While we continue to see significant headwinds for Online Travel generally, we believe Expedia will continue to benefit from competitors’ focus on margins over growth.”

Rates buy, raises price target to $160 from $140

What Bloomberg Intelligence Says

“Expedia will continue to rein in direct and performance-advertising spending to sustain its double-digit Ebitda growth forecast, in our view. Aside from the pressure on its Trivago business, the company’s core online travel agency (OTA) and HomeAway segments should continue to show healthy booking and room-night trends.”

-- Mandeep Singh and Andrew Eisenson, Technology AnalystsClick here to see the research

(Updates shares in first paragraph.)

--With assistance from Gregory Calderone.

To contact the reporter on this story: Catherine Larkin in Chicago at clarkin4@bloomberg.net

To contact the editors responsible for this story: Chris Nagi at chrisnagi@bloomberg.net, Steven Fromm, Richard Richtmyer

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