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Why SunTrust's Bob Peck Is Downgrading HomeAway

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  • The share price of HomeAway, Inc. (NASDAQ: AWAY) has appreciated 16.85 percent over the past month, reaching a high of $32.63 on Monday.
  • Bob Peck of SunTrust Robinson Humphrey has downgraded the rating on the company from Buy to Neutral, while raising the price target from $36 to $38.
  • Given that the company has agreed to be acquired by Expedia Inc (NASDAQ: EXPE), Peck expects HomeAway’s shares to closely track Expedia’s share price performance in the near term.

Analyst Bob Peck explained that while the “ongoing transition to transaction-based model has been challenging, we continue to believe AWAY is a unique asset that is difficult to replicate,” while mentioning that on a growth adjusted basis, “the transaction values AWAY at a discount to the group, suggesting possibility of potential counter bids.”

HomeAway has agreed to be acquired at $38.31 per share, which includes $10.15 in cash and 0.2065 in Expedia shares. This is a 20 percent premium to HomeAway’s closing price. The acquisition is subject to the usual regulatory and shareholder approvals, and is expected to close in 1Q16.

Peck described HomeAway as a “unique asset going through business model transition.” The company is estimated to have 15 percent share of the vacations bookings market, which Peck believes “provides a large runway for growth.”

According to the SunTrust report, “The company has been transitioning its platform toward transaction-based model with online booking from a basic listings service, which has been challenging.”

HomeAway posted its Q3 revenues in-line with the consensus, with higher than expected EBITDA. Although the company has not provided the 2015 guidance, the 2015 and 2016 revenue and EBITDA estimates have been raised.

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Posted-In: Robert S. Peck SunTrust Robinson HumphreyAnalyst Color Downgrades Price Target Analyst Ratings


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