Analysts React To Expedia's Postive Quarter
After the closing bell on Thursday, Expedia (NASDAQ: EXPE) reported its fourth-quarter earnings which beat analysts' estimates.
Expedia rose to $74.45 at the close in New York, the largest gain since Oct.31. Gross bookings jumped 21 percent in the quarter, driven by room night growth at Expedia's eLong and Hotels.com brands. Expedia also benefited from an increase in air tickets.
Adjusted earnings per share totaled 92 cents in the quarter at Expedia. During 2013, Expedia said it earned $3.22 per share on an adjusted basis on revenues of $4.8 billion. Gross bookings for the full year improved 16 percent.
Expedia shares fell sharply after the website's Internet traffic dropped, apparently after Google (NASDAQ: GOOG) cut the visibility of its links in search engine results to punish Expedia for improper SEO practices.
Bank of America raised its price objective to $86. Analyst Justin Post believes in Expedia going forward, primarily due to improved execution practices and accelerating trends. Analyst Justin Post also reiterated a Buy rating, and stated that the Google traffic headwinds did not materialize in the outlook and Expedia guided 2014 EBITDA growth of 14.5 percent, which was in-line with Street expectations and above Bank of America's 10.5% year-over-year estimate. Bank of America also highlighted a two percent lower tax rate.
Morgan Stanley did not issue a price target, but its analysts' such as Scott Devitt analyzed that it performed well with solid margins and returns across all Expedia segments. Despite an increased competitive environment, Expedia reacted well to initial missteps. Morgan Stanley also believes that Expedia is showing good momentum on bookings growth over the past two quarters even though competitive conditions are increasing.
Benchmark analyst Daniel L. Kurnos expects Expedia will be able to gain market share from merchant retailers and offline travel agents. They also anticipate Expedia's growing global brand and increasing penetration of emerging markets to continue to expand.
Deutsche Bank analyst Ross Sander has given a price target of $70.00, the bank also believes that trends are increasingly getting better. Merchant revenue growth was six percent reflecting sluggish and revenue margin declined 165bps. The company noted that the competitive environment for Hotwire still remains challenging but has seen improvements in the fourth-quarter and expects to deliver stable results in 2014.
Stifel has issued a Hold rating on Expedia, it has said that it believes that the fourth-quarter results were solid, including improved profits and an impressive acceleration in room night growth. They also believe that the company is getting into a better operational rhythm, in terms of driving traffic.
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