NEW YORK (AP) — Investment firm Stifel Nicolaus has lowered its rating on Expedia Inc. to "Hold" from "Buy," noting that any big acceleration in the online travel company's shares is unlikely because of global economic weakness.
THE OPINION: While shares are too expensive to warrant a Buy rating, Stifel Nicolaus said Expedia — the world's largest travel agency by total bookings — should continue to gain market share as it expands online offerings and through smartphone applications. Besides its namesake brand, Expedia also operates hotels.com and hotwire.com, among dozens of others. The company has been keenly focused on the hotel segment as its main area of expansion, which Stifel said was the driver behind much of its growth.
Bellevue, Wash., based, Expedia said last month that its net income fell in the second quarter by far less than analysts expected. Revenue rose 14 percent to $1.04 billion. Three-fourths of Expedia's revenue comes from selling hotel bookings, and that business grew 16 percent as the company booked 22 percent more overnight stays. That more than offset a decline of 8 percent in airline-ticket revenue.
Expedia shares have surged 86 percent so far this year, compared with less than 12 percent growth in the S&P 500. A shaky global economy, especially in Europe, should keep a lid on shares for now, Stifel said, but it still believes that the stock will continue to grow if the company keeps performing as it has been.
THE STOCK: Up 86 percent for the year, down 2 percent since it reported earnings in late July. Stifel expects the stock to grow to $60 per share within a year. In afternoon trading, Expedia fell $1.41, or 2.6 percent, to $52.42.