Expedia Inc. Stock Downgraded (EXPE)
NEW YORK (
)
-- Expedia
(Nasdaq:
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, robust revenue growth and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity.
Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Internet & Catalog Retail industry average. The net income increased by 18.7% when compared to the same quarter one year prior, going from $176.55 million to $209.53 million.
- The revenue growth significantly trails the industry average of 51.8%. Since the same quarter one year prior, revenues rose by 15.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- EXPEDIA INC has improved earnings per share by 21.0% 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, EXPEDIA INC increased its bottom line by earning $2.94 versus $2.06 in the prior year. For the next year, the market is expecting a contraction of 8.7% in earnings ($2.69 versus $2.94).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet & Catalog Retail industry and the overall market on the basis of return on equity, EXPEDIA INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- EXPE's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 35.97%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
Expedia, Inc., together with its subsidiaries, operates as an online travel company in the United States and internationally. The company has a P/E ratio of 17.1, above the average leisure industry P/E ratio of 9.3 and below the S&P 500 P/E ratio of 17.7. Expedia has a market cap of $3.79 billion and is part of the
sector and
industry. Shares are up 14.8% year to date as of the close of trading on Tuesday.
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