Cowen & Co Reviews Expedia Earnings

In a report published Friday, analysts at Cowen and Co. maintained their Outperform rating on

, as well as the price target of $115. The company reported its Q1 results with accelerating growth in its hotel business. Although losses at eLong (China) continued during the quarter, Expedia reported acceleration in room nights (excluding eLong), driven by direct traffic, ad spend, conversions and hotel supply. Margins were also up across all segments, except for eLong. However, the analyst believe that seasonal ad spend could lead to slowing in this growth in Q2. The higher ad spend during the quarter was mitigated by scale benefits, which also led to an improvement in core margins. The company's take rate continued to grow, driven by loyalty programs and hotel supply initiatives. Expedia also added 13,000 new hotels in Q1, taking the total to 230,000 hotels, excluding eLong. "While margins may be down in Q2 on seasonal ad spend, the positive start to FY15 reinforces our view that the margin environment in Online Travel (ex-China) remains healthy," the analysts said. While eLong contributed 20 percent of the consolidated room nights during the quarter, it only accounted for 2.5 percent of the revenue. eLong is expected to continue at similar levels throughout the year, as the China Online Travel market continues to experience an extreme discounting environment," Cowen and Co added.