So Expedia's stock is riding high. Should you buy in or is this the peak.
Here is our take on the current run-up. Given how bad things have been lately over there in Bellevue - we were wondering for some time how long Dara would last. But since he has the confidence of Chairman Barry he will be around for a while. Having been caught off guard by the TPG/Sabre and then Blackstone/Travelport, Expedia should be making solid progress on a wide variety of fronts in order to show it is maintaining momentum. And there has been progress. Probably more of the "not-so-bad" variety rather than than a great performance.
Expedia just might go private. The current price is too high. But if there is a significant dip in the price over the next few months I think we can see more buybacks or an offer to take it private.
The long tail wont affect Expedia for a few years yet. The critical metrics are to look at the performance of the international divisions - particularly China, Germany and UK - and the value of TripAdvisor which could probably be hived off at a premium. Especially given certain analysts hype of Travel 2.0.
The suppliers are sitting pretty. The Hotel Industry just reported another record year with profits that probably exceed the total profits ever recorded by the airline industry. As long as this is the situation - then Expedia will be constrained. If (as we expect) we see a softening of the market in 2008/9, then Expedia's yields should pick up. So now would be a good time to go private IF the prices was right.
Stay tuned folks
Cheers
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