Pacific Crest Upgrades Expedia (EXPE) to Overweight
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Pacific Crest upgraded Expedia (NASDAQ: EXPE) from Sector Weight to Overweight with a price target of $160. Analyst Brad Erickson noted positive HomeAway checks, along with favorable risk/reward.
"Conversations with property owners indicate overall high satisfaction with the HomeAway platform, very limited desire and ability to move to competing platforms and greater confidence in passenger fee implementation and take-rate levels already being achieved. We think this is under-appreciated in shares at current levels," said Erickson.
"We are establishing EBITDA estimates by segment, enabling a sum-of-the-parts valuation. We are also making an appropriate, albeit slight, upward adjustment to our 2016 and 2017 EBITDA estimates via D&A; our EPS estimates are unchanged. Additionally, we are establishing 2018 revenue, EBITDA and EPS estimates. We are forecasting a 21% three-year revenue CAGR from 2015-2018; we expect some leverage from lower tech & content and G&A costs to drive faster EBITDA and earnings growth of 27% and 28%, respectively," continued the analyst.
Erickson concluded, "Given some mixed hotel data during the quarter, we are not making a call on the quarter; however, HomeAway checks combined with our view of Expedia having multiple levers to support growth over the next few years give us incremental confidence in the story despite the recent mini-run in the stock. We are buyers and see upside to $160 based on a sum-of-the-parts analysis with a bull case approaching $200."
Shares of Expedia closed at $124.69 yesterday.
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