Oppenheimer: HomeAway Is Worth $37 Per Share; Will Outperform

Oppenheimer initiated coverage on HomeAway, Inc. AWAY Wednesday with an Outperform rating and $37 price target.

Analyst Manish Hemrajani felt the company was "well positioned to benefit from a strong travel macro and a secular online shift in travel."

Hemrajani noted that company was a market leader "in a unique and growing segment of the travel ecosystem," was innovative in its online execution, had favorable demographics, was expanding geographically and had a strong management team.

"HomeAway is the world's largest online marketplace for vacation rentals (VRs), with a presence in 190 countries and 1M+ paid listings. Given a potential market size of $100B with ~8.25M listings, we see considerable headroom for growth, led primarily by increased adoption of the pay-per-booking (PPB) model, rising awareness among travelers and an increasing TAM," according to Hemrajani.

The firm's investment thesis was based on five points:

1. The company was a "global leader in a niche but growing marketplace with strong network effect."

2. A "secular shift of offline to online in travel industry."

3. The "listings expansion potential with market relatively underpenetrated."

4. "ARPSL upside through tiered/bundled pricing and value-add offerings as meaningful growth drivers."

5. An "accelerating shift of listings to online."

The analyst expected continued recovery in global GDP, which would be favorable for the travel sector and HomeAway as travel is closely linked to GDP growth.

The $37 price target valued the stock at 5.9x EV/revenue based on the firm's 2015 estimates and ahead of its peer median of 4.8x versus the 3-year historical range 4.4-10.6x.

The firm's DCF also yielded a $37 price target under the assumptions of a WACC of 8.9 percent, a terminal value of $3.53 billion and a terminal growth rate of 3.5 percent.

HomeAway, Inc. recently traded at $30.83, up 1.31 percent.