23 July 2007

Expedia Trips... Stock drops

Big drop today!

We have written before that we think Diller may have lost some of his magic. The recent stock behavior of Expedia has been interesting. From the depths of last year’s catastrophic position to this year's all time high we can attribute this to many things. But is the stock still a darling?

Clearly not enough to capture the imagination of the large scale bond holders. They have derailed the massive $3.5 Billion Stock Buyback. WSJ blogs point the culprit at the bond vigilantes. http://blogs.wsj.com/deals/2007/07/23/bond-vigilantes-take-down-expedia/

Today Expedia (EXPE) was forced to scale back its second stock buyback program since its re-launch over 2 years ago. The powers that be are punishing Expedia for either being greedy or too opportunistic. Either way it took a big drop today - over 9%.

The company however remains fundamentally sound and Dara and Co can stay on a little longer. Growth however is not going to be as easy to come buy as in former years. With the US market (sssssshhhhhhhh) now at saturation point for online - it’s a game of share shift rather than market expansion. Internationally the second tier markets will not return big numbers (for example recent expansion into the Nordic Countries). So outperforming the market will be hard unless good old Barry can work some of his old black magic.

Our view is the overall market will be pretty stable. Today was also coincidentally the market debut of Orbitz Worldwide. (OWW) That finished just slightly down on the day. With both Sabre and Amadeus currently out of the market and in the hands of Private Equity firms - we don’t have as much market info to work with. But still Priceline (PCLN) (who seem to have done everything right to assure themselves a seat at the top table) are the current darlings.

Of course tomorrow it could all change.



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