Expedia (EXPE) Stock Gains on $3.9 Billion HomeAway Deal, Jim Cramer: Brilliant Acquisition

Expedia (EXPE) stock is rising in pre-market trading after the company agreed to acquire HomeAway (AWAY) in a cash and stock transaction valued at $3.9 billion.
By Amanda Gomez ,

NEW YORK (TheStreet) -- Expedia (EXPE) - Get Report stock is increasing 3.64% to $139.06 in pre-market trading on Thursday after the company agreed to acquire HomeAway (AWAY), an online vacation rental marketplace, in a $3.9 billion deal.

HomeAway stock is soaring 23.88% to $39.69 this morning.

TheStreet's Jim Cramer, portfolio manager of the Action Alerts PLUS charitable trust portfolio, has this to say about the deal: "Brilliant acquisition. Great for all, just hope they get it at that price because I love both companies."

Expedia, an online travel booking company, will pay $10.15 in cash and 0.2065 Expedia shares for each HomeAway share.

The boards of both companies have approved the transaction, which is subject to shareholder and regulatory approval.

"Bringing HomeAway into the Expedia family and adding its leading brands to our portfolio of the most trusted brands in travel is a logical next step," Expedia CEO Dara Khosrowshahi said in a statement.

The acquisition will expand Expedia into the $100 billion alternative vacation accommodations market, Khosrowshahi added.

The transaction is expected to close by in the first quarter of 2016.

Separately, TheStreet Ratings team rates EXPEDIA INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

We rate EXPEDIA INC (EXPE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, reasonable valuation levels, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 59.74% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, EXPE should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • EXPEDIA INC has improved earnings per share by 9.3% 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. We feel that this trend should continue. During the past fiscal year, EXPEDIA INC increased its bottom line by earning $3.00 versus $1.66 in the prior year. This year, the market expects an improvement in earnings ($4.12 versus $3.00).
  • The revenue growth significantly trails the industry average of 45.7%. Since the same quarter one year prior, revenues rose by 13.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet & Catalog Retail industry and the overall market, EXPEDIA INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: EXPE

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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