Expedia Earnings Preview: Third Quarter 2008

Expedia (EXPE: 33.71 -0.97%) is scheduled to report third quarter 2008 results before the market opens on Thursday, October 30. Based on our analysis, we at eChristianInvesting are expecting EXPE to report disappointing results that fail to meet Wall Street’s consensus expectations.

Analyst Expectations

We are forecasting revenues of $830 million and EPS of $.39. This would represent a 9% increase in revenues from last year’s $759.6 million in the same period. The current analyst consensus calls for revenues of $837.2 million and $.40 EPS. The company has given no guidance.

Expedia has the privilege of being the first of the internet travel stocks to report their quarterly results. Their performance will be an interesting barometer as to the degree to which the macroeconomic headwinds have hindered consumer travel purchases this quarter. Our expectation is that American consumers chose to forego vacations this summer due to high oil prices and the discouraging economic outlook. That along with increasing air fares and ridiculous baggage fees has and will continue to weigh on the performance of their business.

Share Performance

Expedia’s shares have been pummeled this year - dropping over 68% to date. After out-performing the market last year with a 51% return, EXPE has under-performed the Nasdaq’s 43% decline this year.

Valuation

Shares are now trading at a mere 6x consensus 2009 EPS estimates. This seems like a very low valuation multiple that indicates investors are expecting analysts to reduce their estimates in the near future. With most of the bad news seemingly already priced into the shares, we believe the valuation is attractive.

Recommendation: Buy with a $12 price target.