Expedia Has Underperformed The Market Since Election Day; Is That Likely To Change?

Expedia Inc EXPE is scheduled to report its Q4 earnings on February 9. “We expect improving room night growth (organic) and look for initial EBITDA guidance for 2017 in the $1.8Bn range, slightly below consensus,” MKM Partners’ Rob Sanderson said in a report.

Sanderson reiterated a Buy rating on the company, with a price target of $145.

Upside To Shares

Expedia’s shares are currently trading at a “significant discount to peers,” while many investors are looking for upside in merger integration synergies, Sanderson mentioned.

The stock had “been a notable underperformer since the election vs. market indices.” The company’s shares were down 5 percent since the election, versus a 6 percent gain in the S&P 500. U.S.-centric hoteliers had gained 16 percent on average, the major airlines were up 17 percent and all travel verticals have been in-line to strong performers.

“It seems the market is bullish on prospects for the key drivers of underlying growth (i.e., hotel rooms, flights), but not passing through a better outlook for EXPE’s core OTA properties,” the analyst wrote, while adding, “We think continuation of improving room night growth is the most important metric for the quarter.”

While merger integration and execution risk remained, the stock’s risk/reward seemed favorable, Sanderson commented.