Expedia Left Behind By Trump Rally, Setting Up An Attractive Entry Point

The "Trump rally" helped boost shares of countless stocks, but there are a few names that have been left behind.

In a research report on Thursday, Scott Devitt of Stifel noted that shares of Expedia Inc EXPE have underperformed the S&P 500 index by around 1,600 basis points since the U.S. presidential election. Specifically, Expedia's stock lost around 10 percent compared to a 6 percent increase in the stock index.

Devitt continued that Expedia's stock now offer an attractive entry point, which justifies an upgrade in its rating to Buy from Hold with an unchanged $130 price target.

Stabilization Of Core Business

Expedia stated last quarter that its core business experienced a room night growth improvement and that October volumes were healthy.

Part of the improvement can be attributed to Expedia's acquisition of Orbitz and that the integration of the acquired platform is now mostly complete. As such, the analyst expects better execution moving forward as resources have been allocated back toward the core business.

Moreover, an improving consumer backdrop and broader geographic penetration positions the company well against easier compares and also support stronger growth throughout 2017.

Longer-Term View

According to Devitt, Expedia's continued investments in technology, product capabilities, selling and marketing, and segments such as HomeAway will likely limit EBITDA margin growth in 2017.

In addition, a $100 million investment in infrastructure and shift towards a cloud platform will also hinder margin improvement.

Therefore, investors should view 2017 as a largely transitional year which sets up 2018 for a year of margin improvement.

At last check, shares of Expedia were up 2.31 percent on the day at $117.34.