UBS Initiates Buy Rating on Orbitz Emphasizing Loyalty Program and Growth Opportunities

In a report published Monday, UBS analyst Eric Sheridan initiated coverage on Orbitz Worldwide OWW with a Buy rating and $10.00 price target. Sheridan noted that Orbitz is well-positioned among its peers. The company's loyalty program encourages users to use its mobile app and hotel bookings, leading to lower marketing costs and higher take rates for the company. UBS wrote, “We believe Orbitz provides investors with exposure to a leading player in the domestic online travel market, with a long runway ahead for its hotel business, particularly given the recent introduction of a new loyalty rewards program (incentivizes both hotel & mobile mix shift). Additionally, we see opportunities for revenue growth residing within Orbitz's business-to-business operations (Orbitz for Business, Orbitz Partner Network) and within International markets.” Although the company's international segment is seeing benefits from the technology replatforming, the analyst remarked that Orbitz “remains subscale on a global basis”. UBS' 2013-2016 revenue CAGR is 7 percent versus the street's 6 percent. The three year estimates for EBITDA CAGR is 11 percent, ahead of the street's 9 percent estimate. Shares of Orbitz closed at $8.12 on Monday. The stock is currently up 4.31 percent an hour after Tuesday's opening bell.