Expedia's (EXPE) Competitive Threats Greater than AWAY Deal Benefits - Janney

Expedia (NASDAQ: EXPE) announced it would acquire HomeAway (AWAY) for $10.15 per share in cash and 0.2065 of a share of Expedia common stock. Analysts at Janney estimate the deal is priced at over 23x our 2016 EBITDA estimate. The deal is expected to close in 1Q16 and will be dilutive to 2016 EPS. The rationale for the acquisition is mostly centered on leveraging its technology and experience to further the transition of AWAY towards an online based business and improved monetization.

On the conference call, AWAY guided to $350M of AWAY EBITDA in 2018. This compares to our estimate of $121M in 2015 and $146M in 2016. Janney analyst, Brian McGill, thinks this “seems aggressive, given the competitive threat from Airbnb” and questions the aggressive multiple for the deal.

The competitive threats for EXPE and AWAY continue to increase as TRIP continues to make progress with its instant book roll out. It is also possible that Airbnb is looking at potentially adding hotel supply.

Janney maintains its neutral rating on EXPE as the analyst believes that take rates will continue to move lower as selling and marketing expenses move higher pressuring profitability. The fair value estimate increased to account for the increased earnings power, now $124 (from $112).

For an analyst ratings summary and ratings history on Expedia click here. For more ratings news on Expedia click here.

Shares of Expedia closed at $134.17 yesterday.

You May Also Be Interested In

• Marti Technologies (MRT) PT Raised to $6 at Benchmark on Stronger Growth, Improved Earnings Visibility
• UBS Reiterates Buy Rating on Dutch Bros Inc. (BROS): 'One of Strongest Growth Stories in Restaurants'
• Rubrik Inc (RBRK) PT Raised to $120 at Oppenheimer; Sees Another 'Beat and Raise'