Cowen Bullish On Expedia

In a new note, analysts at Cowen updated their bullish stance on Expedia Inc (NASDAQ: EXPE). Following the announcement of the company's planned acquisition of Orbitz Worldwide Inc (NYSE: OWW), analysts see additional upside potential for Expedia's stock.Shrinking margins?While Expedia's overall margins declined by 60 bps in 2014, analysts see more tO the story than a single number. In fact, when adjusted for declining eLong, Trivago and Egencia margins, Core Expedia margins actually expanded in 2014 for the first time in five years. "Core margin trends are widely misunderstood," analysts write, "and we expect upcoming detailed segment figures – to be disclosed starting Q1—to be a catalyst for shares."The numbersAnalysts predict compound annual growth (CAGR) in total gross bookings over the next 10 years of about 8 percent. They also forecast a 10 percent CAGR in hotel bookings through 2025. During that same 10-year period, analysts are calling for an 8 percent CAGR in revenue as well. Finally, they see EBITDA margins expanding from an estimated 16.9 percent in 2015 to 22.9 percent by 2025.TrivagoExpedia owns a 62 percent stake in Trivago, which analysts see as the fastest-growing large online travel brand in the world. Analysts point out that they believe that Trivago is currently valued at a large discount with respect to enterprise value to sales ratio when compared to other fast-growing Internet companies such as Twitter Inc (NYSE: TWTR), GrubHub Inc (NYSE: GRUB) and Zillow Group Inc (NASDAQ: Z).OutlookCowen analysts value Core Expedia and Egencia alone at $100 per share. In addition, they see upside in the potential Orbitz deal and hold an overall positive outlook for the online travel industry. Cowen has an Outperform rating on Expedia and a $115 target for the stock.