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Why More Than Half of Analysts Rate Expedia a ‘Buy’

Ally Schmidt

Expedia in 4Q15: Will the Optimistic Analysts Be Right?

Analyst views

It’s important to be aware of analyst recommendations or changes to recommendations. They can significantly affect a company’s stock price. Changes to a popular analyst’s view can cause a significant short-term movement in the price of a company’s stock.

According to Bloomberg consensus, of the 28 analysts tracking Expedia (EXPE), 57.1%, or 16 analysts, have given the company a “buy” recommendation. About 42.9%, or 12 analysts, have given it a “hold” rating, and none of the analysts have given it a “sell” rating.

While only one analyst has downgraded EXPE’s rating, many analysts have lowered their price targets for Expedia in January 2016. It was Neil Fonseca from EVA Dimensions who downgraded EXPE from “buy” to “hold” on concerns of increasing competition.

Target price

Expedia’s consensus 12-month target price is $142.39, which indicates a 52.2% return potential. Mark S. Mahaney of RBC Capital Markets has given Expedia the highest target price of $180 and has maintained the “outperform” rating. Naved Khan from Cantor Fitzgerald has also maintained his “buy” rating with a similar price target of $180. Cyrus Mewawalla from CM Research and Heath P. Terry from Goldman Sachs have the lowest target prices of $102 and $93, respectively, with a “neutral” rating.

Analyst estimates

For 2016, analysts estimate Expedia sales to grow by 30% to $8,637 million, against a 16% growth expected for 2015. In 2016, EBITDA (earnings before interest, taxes, depreciation, and amortization) is expected to increase 42% to $1,607 million compared to $1,132 million, a 10.4% increase, expected in 2015.

In the next few articles, we’ll discuss what led to these estimates. This could help investors judge if analysts are being optimistic or conservative on the stock. We’ll also look at what may be priced into the stock.

In this series, we’ll also cover pre-earnings expectations for EXPE’s competitors Priceline (PCLN), TripAdvisor (TRIP), and Ctrip.com International (CTRP). Be sure to follow the Market Realist’s Online Travel Agency page.

EXPE makes up 1.4% of the Guggenheim S&P 500 Pure Growth ETF (RPG).

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