Shares of Expedia Inc EXPE hit a new all-time high on Friday in reaction to its second-quarter results and are up by more than 40 percent since the start of 2017. Yet UBS's Eric Sheridan maintains a Buy rating on Expedia's stock with a price target boosted from $155 to $178.
Expedia's earnings report not only exceeded investor expectations but also showed:
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- Lodging room nights stayed grow of 21 percent.
- Strong top-line performance in the core online travel agency.
- A 2-percent year-over-year increase in average daily rate (ADR).
- Take rate grew year over year for the second consecutive quarter.
On the other hand, the analyst highlighted a few concerning aspects, including:
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- A 370-basis-point deleverage in sales and marketing.
- A 600-basis-point sequential deceleration in air tickets sold on a 700 basis point easier comp.
- No upward guidance revision to adjusted EBITDA growth despite a beat in the quarter in profit.
Balancing the positive and negatives, the analyst feels that Expedia remains a favorable stock to own given superior organic hotel trends, expectations that marketing spend will deliver a 23 percent room night growth, and positive expectations from HomeAway.
Finally, Expedia's stock is still trading at a "reasonable" forward valuation against its underlying asset value.
At last check, shares of Expedia were up 3.63 percent at $159.87.
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