|
Expedia is
scheduled to report their fourth quarter 2008 results before the
market opens on Thursday, February 19. Based on our analysis, we
at
eChristianInvesting are expecting EXPE to report
disappointing results that fail to meet Wall Street’s
expectations.
Analyst
Expectations
We are
forecasting revenues of $630.5 million and EPS of $.23. This
would represent a 5% drop in revenues from last year’s $665.3
million in the same period. The current analyst consensus calls
for revenues of $634.9 million and $.24 EPS.
Air travel
volume has continued to decline in this difficult economic
environment. By our calculations, air passenger traffic was down
8% in the fourth quarter. Expedia and Orbitz stand to feel the
effects of this downturn in spending more severely than
Priceline.
It is also
interesting to note that Travel Zoo posted a much stronger than
expected quarter. We believe this indicates a higher level of
unsold inventory as travelers moved away from the traditional
travel portals. Our checks seem to confirm this with traffic to
the Expedia.com website falling y/y in October and November.
In 2009,
we expect that consumer spending on leisure travel will continue
to be tempered. Realistic expectations are likely in the
neighborhood of a 5 – 10% decline in revenues. This would be
worst than the 4% decline that Wall Street is currently
forecasting.
Share
Performance
Expedia’s
shares have increased 10% since the beginning of the year.
Although 2008 was extremely difficult for EXPE shareholders as
the stock dropped 74% compared a 34% drop in the Dow Jones
index.
Valuation
Shares are
now trading at 8x consensus 2009 EPS estimates. This seems like
a reasonable multiple value, but we believe there is still
considerable downside risk to the 2009 estimates.
Recommendation:
Hold with a $9 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.
Read
Disclosure Policy |
