Expedia's Slow Progress Is Better Than No Progress

Pacific Crest has maintained its Overweight rating on Expedia Inc EXPE, despite the company reporting mixed quarterly results and guided 2017 EBITDA below estimates.

Recap

• Fourth-quarter adjusted EPS of $1.17 versus $1.37 estimate.
• Q4 sales came in at $2.093 billion versus the estimated $2.07 billion.

Rating Justification

“Reiterate Overweight on an underappreciated rising take-rate commentary and room night growth mean reversion thesis,” analyst Brad Erickson wrote in a note.

The analyst believes the company’s 2017 EBITDA outlook of 10 to 15 percent year-over-year was in line with expectations, despite being below the Street.

Erickson is also encouraged by the uptick in take rates and a reacceleration in room night growth to 16 percent from 11 percent.

That said, the analyst is surprised by HomeAway miss, which appears to have come from a faster roll-off of subscription revenue rather than a bookings shortfall. Erickson believes HomeAway "undergoing several quarters of ad spending will do little for the 2018 EBITDA upside narrative."

But, the analyst stuck to its $160 price target on the shares on improving take rates and potential upside to mean reversion.

“With the 2017 guide out of the way and management talking down 1H, we think the bar is set low enough and remain buyers of the stock,” Erickson added.

At last check, shares of Expedia were down 0.27 percent to $122.92.