eLong (LONG) Stock Spikes After Expedia Sells Stake

NEW YORK (TheStreet) -- eLong (LONG) shares are up 9.4% to $22.59 in trading on Friday after Expedia (EXPE) sold its entire 62.4% stake in the Chinese hotel reservation company to several different companies for $671 million.

Expedia first purchased a stake in the company in 2004 and boosted that stake to majority ownership in January 2005.

Shanghai-based Ctrip  (CTRP) announced that it had purchased the largest portion of the stake, 37.6%, for $400 million. 

An analyst at Stifel Nicolaus estimated that eLong took about $33 million out of the company's first quarter earnings and that for the year the sale of the company's stake should add about $85 million to its earnings.

Expedia shares are down 0.95% in trading today while Ctrip shares are up 17.68% to $84.71.

TheDeal has further coverage of the transaction here.

TheStreet Ratings team rates ELONG INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ELONG INC (LONG) 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 largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."

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

  • LONG has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, LONG has a quick ratio of 1.73, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The revenue fell significantly faster than the industry average of 19.1%. Since the same quarter one year prior, revenues fell by 13.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet & Catalog Retail industry and the overall market, ELONG INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ELONG INC is currently lower than what is desirable, coming in at 34.95%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -85.26% is significantly below that of the industry average.
  • You can view the full analysis from the report here: LONG Ratings Report

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