Orbitz Boost? Cowen & Co's Expedia Price Target Just Skyrocketed To $150

• Expedia Inc EXPE shares have gained 45 percent year-to-date, climbing steadily since the beginning of March.
• Cowen & Co's Kevin Kopelman maintained an Outperform rating on the company, while raising the price target from $135 to $150.
• The closing of the acquisition of Orbitz Worldwide, Inc. OWW boosts the confidence in Expedia's trajectory, Kopelman said.

Expedia has closed the acquisition of Orbitz. “With Orbitz already incorporated into our 2016 estimates, the deal close both eliminated the biggest risk and opened the door to a key potential upside driver,” analyst Kevin Kopelman wrote.

Kopelman said that there are three key factors that lend upside to Expedia’s shares:

1. The long-term Orbitz synergy opportunity of more than $350 million - “Our FY16 EBITDA estimate of $1.62B includes ~$250M from Orbitz (~$0.70 of EPS incl. stock comp), assuming ~$75M in synergies, in line with guidance. However, Orbitz has non-advertising operating expenses of ~$350M, or an additional $275M of potential synergies,” Kopelman elaborated.
2. Momentum in the Core "marketing machine" - Expedia seems to be making substantial y/y progress across all four areas of its marketing machine, namely technology/conversion, variable marketing spend, direct traffic/loyalty, and supply.
3. Expanding contribution from Trivago - Expedia had acquired a 62 percent stake in Trivago in 1Q13 and has been running the latter at breakeven to “fund a geographic expansion via aggressive brand marketing, most notably in the US,” the Deutsche Bank report stated. Kopelman added, “As the geographic buildout matures, we expect Trivago EBITDA margins to reach and eventually exceed overall Expedia.”

The analyst believes that Expedia is well positioned to continue gaining market share in the hotel booking industry, in view of its robust portfolio of global brands and competitive technology platform and hotel network.