Expedia (EXPE) Tumbles on Downgrade

NEW YORK (TheStreet) -- Expedia (EXPE) shares fell 7.2% to $48.02 as of 12:54 p.m. New York time, following a Deutsche Bank downgrade to "hold" from "buy".

The online travel company closed Friday trading at $51.73 and opened Monday morning at $49.75. The number of shares traded is more than double its three-month average daily trading volume: 8.7 million shares have changed hands compared to the average 3.26 million.

Overall, shares are lagging the S&P 500 which is down 0.48%.

TheStreet Ratings team rates Expedia Inc as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate Expedia Inc (EXPE) 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 robust revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."

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

  • Despite its growing revenue, the company underperformed as compared with the industry average of 17.8%. Since the same quarter one year prior, revenues rose by 15.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.56, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.71 is weak.
  • Net operating cash flow has decreased to $318.52 million or 42.37% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The share price of EXPEDIA INC has not done very well: it is down 7.04% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

Written by Keris Alison Lahiff.

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