After HomeAway, fewer options to bet directly on sharing economy

By Noel Randewich

SAN FRANCISCO (Reuters) - It is about to get even harder for stock market investors to make direct bets on the small but fast-growing sharing economy that has gained attention from the runaway success of Uber and Airbnb.

Expedia's (NASDAQ: EXPE) deal to buy vacation rental site HomeAway Inc (NASDAQ: AWAY) for about $3.9 billion, unveiled Wednesday, will shorten an already modest list of publicly-traded companies focused on peer-to-peer home rentals, ride-hailing services and other ways for people to make money from their personal property.

It is a sector that could earn $335 billion in annual revenue over the next decade, estimates PriceWaterHouseCoopers, and present opportunities for investors, according to Credit Suisse.

But many of the smallish firms currently trading in that space on U.S. exchanges have not performed as well as HomeAway, up almost 20 percent since the deal with Expedia was unveiled.

Peer-to-peer finance company LendingClub (NYSE: LC) has fallen 43 percent year to date and is just below its 2014 initial public offering price. Textbook renter Chegg (NYSE: CHGG) is up 9 percent this year but remains 39 percent below its lofty 2013 IPO price.

With a combined market capitalization of just $10 billion, those companies and HomeAway are dwarfed by sharing economy heavyweight Uber, whose most recent round of funding valued it at over $50 billion, and Airbnb, valued around $25 billion.

"If you're looking for a public company related to the sharing economy, there's nobody else doing it at this scale," said Cantor Fitzgerald analyst Naved Khan.

Uber CEO Travis Kalanick recently said his company was years from an IPO. Airbnb has been quiet on its plans go public and in June raised $1.5 billion in fresh funds, suggesting it is in no hurry.

Credit Suisse's equities research group in a recent report listed LendingClub, TripAdvisor (NASDAQ: TRIP), United Kingdom-listed Regus and car rental agencies Avis Budget (NASDAQ: CAR) and Hertz (NYSE: HTZ) among stocks poised to benefit from the sharing economy.

Regus , which since the 1980s has offered temporary offices and meeting rooms, has surged 61 percent this year. JCDecaux , an advertising company that operates public bike-share systems across Europe, has jumped 28 percent.

None are bargain priced, however. LendingClub now trades around 66 times expected earnings and Chegg at 47 times earnings making both more expensive than HomeAway at 46 times earnings.

Compass Point Research analyst Michael Tarkan recommends selling LendingClub's stock because of competitive risks and regulatory uncertainty related to its use of a third-party bank to make loans, which it then buys and sells to investors.

Chegg, which started as a textbook rental service and is transitioning to a digital business as well as connecting tutors with students, has yet to see its stock reach its IPO price. That underscores the importance of carefully weighing valuations, even if only a handful of sharing-economy stocks are available to investors.

"Beware buying new offerings of 'sharing economy' powerhouses if they come public during a period of market exuberance. They will likely be overpriced," wrote Guild Investment Management executive vice president Tim Shirata in a note to clients on Thursday. "Wait for a significant correction before you invest."

(Reporting by Noel Randewich, additional reporting by Jeffrey Dastin in New York; Editing by Linda Stern and Andrew Hay)

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