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Expedia 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.
At the time this article was published, the author did not have
a financial position in any of the stocks mentioned in this
article.
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