Market News : Analyst Actions
Whole Lotta Lovin': Analysts Get Happy on Expedia, priceline
By Eric Gillin
Staff Reporter
5/1/01 9:55 AM ET
Expedia.com (EXPE:Nasdaq - news) expedited its march to profitability, announcing earnings last night that beat expectations and went into the black a full year ahead of schedule. Today, that outperformance was rewarded by Wall Street's analyst community, which upped estimates on the Microsoft (MSFT:Nasdaq - news)-backed travel e-tailer.
Prudential Securities' Mark Rowen kept his strong buy rating on the company, raising his price target to $35 from $24. Yesterday, Expedia broke past his old price target, closing at $26.01, extending a monthlong rally that saw its stock go up 124% since March 29. But even after that upside explosion, Rowen sees more room for growth, increasing his 2002 earnings estimate to 40 cents a share from 3 cents a share.
"We believe Expedia will be an operating margin improvement story over the next several years," he wrote. "On a sequential basis, it appears that Expedia has gained significant market share from archrival Travelocity.com (TVLY:Nasdaq - news). We will watch to see if this is the beginning of a trend or simply one data point."
Goldman Sachs' Anthony Noto reiterated his market outperform rating and upped his estimates on the company after it killed his targets last night. Expedia came in 21% higher than Noto's revenue target of $92 million and 23 cents better than his call for a 14-cent loss. After the company performed that well, Noto's tune has changed somewhat. He now expects the company to bring home revenue of $393.8 million and earnings of 9 cents in the fiscal 2001, much higher than the $348.7 million in revenue and the 31-cent loss he previously forecast.
"We are impressed by the results [and] continue to think Expedia is a well positioned company," the analyst wrote before adding a cautionary note. "The stock is up 172% year-to-date and trades at 116 times 2001 price-to-earnings. Expedia is exiting the seasonally strongest quarter amidst economic uncertainty and pending launch of Orbitz in June."
Don't Call it a Comeback. The Web's Been Here for Years
Noto also upgraded priceline.com (PCLN:Nasdaq - news) to market outperform from market perform, telling investors that the company has finally "right sized" the business, fixed customer service issues and shown stable growth.
Sure, the analyst warned that priceline.com is still in a "turnaround phase," but he said that first-quarter results, which will hit the tape after today's bell, could be the Web merchant's last unprofitable quarter. Next quarter, Noto has a positive earnings estimate and said that priceline's airline ticket sales, headed into the vacation-packed summer season, should benefit from the current state of the airline industry.
"First-quarter results should demonstrate the worst is behind the company and the stock should show solid appreciation driven by execution and investor belief in the viability of the business," he wrote. |
