The firm said the revision was a valuation call due to slowing growth.
"We believe OWW could underperform as it faces tough comps from lapping the start of its American Express white-label relationship, air volume slows as the result of the end of its 5-year exclusive relationship with Kayak and what we see as better air execution at EXPE and PCLN, and early traction in its Orbitz Rewards program (leading to higher contra-revenue) puts pressure on revenue growth," analysts wrote in a note to clients.
By market open, shares had cratered 9.3% to $8.12.
Separately, TheStreet Ratings team rates ORBITZ WORLDWIDE INC as a Hold with a ratings score of C-. The team has this to say about their recommendation:
"We rate ORBITZ WORLDWIDE INC (OWW) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its notable return on equity, expanding profit margins and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to other companies in the Internet & Catalog Retail industry and the overall market, ORBITZ WORLDWIDE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for ORBITZ WORLDWIDE INC is currently very high, coming in at 82.44%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 2.70% is above that of the industry average.
- ORBITZ WORLDWIDE INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ORBITZ WORLDWIDE INC turned its bottom line around by earning $1.50 versus -$2.84 in the prior year. For the next year, the market is expecting a contraction of 76.7% in earnings ($0.35 versus $1.50).
- The debt-to-equity ratio is very high at 10.62 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.38, which clearly demonstrates the inability to cover short-term cash needs.
- Net operating cash flow has significantly decreased to -$24.88 million or 2654.72% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: OWW Ratings Report