Expedia - E-commerce Titan

Priceline Is Properly Valued While Expedia Is Undervalued
by: Media Tech Analyst March 08, 2010 | about: EXPE / PCLN
Media Tech Analyst


This is the tale of two online travel companies – company A and company B.

Company A raked in $21.8 billion of gross travel bookings in 2009 and is by far the largest online travel company. It generated $3 billion in fees, or revenues, from those bookings. Those fees are expected to grow 17% in 2010, according to consensus. EBITDA is expected to reach nearly $950 million in 2010, up 12% YoY. Its market cap is $7 billion and the shares trade at an EV/EBITDA multiple of 6.7x. The company is levered at 1.1x debt to TTM EBITDA and pays a quarterly dividend of 7 cents a share, the only Internet company to do so. It also trades at a PE multiple of 14.7x 2010 EPS with a PEG of 1.1x and has a 10.5% free-cash-flow yield with FCF per share growing 16% in 2010.

Company B raked in $9.3 billion in gross travel bookings in 2009 and generated $2.3 billion in fees from those bookings. Its revenues are expected to grow 19% in 2010 and EBITDA expected to grow 25% to $730 million, so margins are expanding. It has a market cap of $10.7 billion and trades at an EV/EBITDA multiple of 14.5x. It is levered at 0.9x debt to TTM EBITDA. Company B also trades at a PE multiple of 21.2x 2010 EPS with a PEG of 1.0x and has a 5.4% free-cash-flow yield with FCF per share growing 18% in 2010.

Company A is Expedia (EXPE) and Company B is Priceline (PCLN). Priceline in my view is properly valued and has more room to run while Expedia is undervalued. Priceline has been taking share in the lucrative European hotels booking business. However, Expedia’s results over the past year has been good, beating consensus expectations in every quarter in the past year. Despite that, the shares have languished, dropping 25% since last October 2009, while Priceline’s shares have soared.

I have written about the disparity in the past, see previous write-up Flying High With Expedia. I am repeating the analysis here, which shows that if one were to value Expedia at Priceline’s EBITDA multiple, then Expedia’s shares would be worth $45 per share, 93% above the current share price. The 10.5% FCF yield is extremely attractive. Many Internet companies trade at less than half that yield, implying that EXPE shares should at least be worth 50% above the current share price.

This is clearly a situation that should not persist. Management should use its cash to buy back shares. In fact, I believe the model is underlevered at 1.0x EBITDA. The company should lever the balance sheet to about 2.5x EBITDA and use the cash to shrink the equity by approximately 15%. Other ideas for value creation include selling several online travel assets. It can also look at spinning off TripAdvisor into a separate publicly traded company.

So I am recommending that activist investors buy the shares and force management to enhance shareholder value by employing the suggestions above. The largest shareholder, John Malone, has to be displeased with the valuation. Or maybe it is time for private equity firms take another look at the sector.

A Little Extra Cash From Expedia

Current and former users of travel booking site Expedia.com (EXPE: 20.80*, -0.17, -0.81%) might have a little extra in their site accounts.

As part of a class-action lawsuit settlement, Expedia paid out $123.4 million in cash and site credits earlier this month. The lawsuit, filed in 2005 and settled in 2009, alleged that the company’s bundled tax and service fees were excessive and that bundling the charges unfairly prevented consumers from assessing the amount and nature of individual fees. Expedia denies any wrongdoing. (Expedia responded by directing SmartMoney to its public filings on the lawsuit. Seattle firm Hagens Berman, which filed the lawsuit on behalf of consumers, did not return calls for comment.)

So what’s in it for travelers? Affected consumers -- those who paid a bundled tax and service charge to the site for a standalone or packaged hotel reservation between Jan. 10, 2001, and June 11, 2008 -- who filed a claim last year could opt to receive a cash payout of 30% of fees paid, or site credit worth 65%. Those who didn’t automatically received the site credit earlier this month. It’s available in the “Coupons” section of your account and expires July 31, 2011.

“It’s not much of an incentive to book through Expedia,” says Linda Sherry, a spokeswoman for advocacy group Consumer Action. Only the most die-hard Expedia bookers will see more than a few dollars.

But consumers hunting for the best deals may find even that little bit is worth making a booking, says Rick Seaney, the chief executive of deal-tracking site FareCompare.com. Hold off until there are more valuable coupon codes to be used in conjunction. (Expedia frequently offers coupons good for $100 off airfare and hotel packages, for example.)

Cash for Credit Cards, Diamonds, Bank Overdrafts

In 2008, SmartMoney.com alerted readers to widespread class-action lawsuits on diamonds and credit card currency conversion fees, and in 2009, on bank overdraft fees.

Laying claim to the cash is just one step in a lengthy process, however. Once the court grants final approval, that triggers a 30-day period to file appeals, each of which in turn must be dismissed or handled in a court of appeals, says David Langer, an attorney with Philadelphia law firm Berger & Montague, one of several handling the credit-card settlement on behalf of consumers. “We hope it will be wrapped up soon,” with payouts in late 2010, he says. (The other lawsuits are also in the appeals process.)

Bottom line: Any cash received is likely to be just as surprising to claimants as the proceeds from the Expedia settlement. The deadlines for consumers to file claims for the settlements have long-since passed, but those who have should send any changes in their contact information to the claims administrator listed on the class-action lawsuit site, Langer says. If administrators can’t find you to pay, that settlement cash could join other unclaimed assets at your state treasurer’s office.

Read more: A Little Extra Cash From Expedia - Spending - Deals - SmartMoney.com http://www.smartmoney.com/spending/deals/a-little-extra-cash-from-expedia/?cid=1122#ixzz0rVefDthJ

NEWTON, Mass., July 30 /PRNewswire/ -- TripAdvisor®, the world's largest travel site*, has announced a new partnership with mobile giant Nokia, which will include an Ovi app for Nokia's Ovi Store, and integration of the TripAdvisor service into Nokia's Ovi Maps.


The TripAdvisor for Nokia app allows travelers to search for popular hotels, restaurants and attractions in their vicinity, as well as find the cheapest airfares available. The app is available in 12 different languages, giving travelers around the globe a localized TripAdvisor experience.

With the tap of a finger, Nokia users can now find and filter hotels and attractions by rating, distance and price. Travelers can also post reviews while they're on the road and their experiences are still fresh.

"Our collaboration with Nokia further strengthens our commitment to providing trusted and valuable travel advice at home or on the go," said Steve Kaufer, TripAdvisor founder and CEO. "We are thrilled to launch TripAdvisor for Nokia which gives even more travelers a new way to access the more than 35 million traveler reviews and opinions available on TripAdvisor."

As part of the agreement, a dedicated TripAdvisor service will also be integrated into the popular Ovi Maps environment.

"The ability to find the best places around you is a key advantage of connected mobile services. The TripAdvisor integration means Nokia users get immediate access to the latest user reviews of the restaurants, hotels, and attractions in their immediate area, or anywhere else in the world they may want to discover while on the go. Global free drive&walk navigation on Ovi Maps means that once you find that great place, you are sure to get there hassle-free using Ovi," said Robert Rogers, Senior Manager, Ovi Publish.

The TripAdvisor for Nokia app is available for free to all Nokia Symbian touchscreen smartphone users globally today on the Ovi store. TripAdvisor for Ovi Maps launches today in select markets, with full global roll-out scheduled within a month.

Expedia Shoots Down Google

By Rick Aristotle Munarriz | More Articles
December 9, 2010 | Comments (2)


Like a playboy losing his touch, Google (Nasdaq: GOOG) is getting rejected a lot lately.

* "We should see other people," said Groupon.
* "It's not you. It's -- well -- you," said smartphone owners who turned their backs on Google's Nexus One.
* Television networks have slapped Google TV -- in the face!

Google's latest Dear Sergey letter comes from TripAdvisor. According to a Dec. 8 story by Tnooz.com's Kevin May, the popular travel reviews website is quietly blocking its user ratings from populating Google Places, a popular component of Google's mapping site.

If you're looking for an explanation for TripAdvisor shunning the potential of reaching out to Google's many visitors, it helps to examine its family tree. TripAdvisor's parent is Expedia (Nasdaq: EXPE), one of the many online travel portals concerned with Google's pending purchase of Web-based booking specialist ITA Software.

If Google is successful in acquiring ITA, many portals will begin sizing up the world's leading search engine as a competitor. Orbitz Worldwide (NYSE: OWW), Kayak, Microsoft's (Nasdaq: MSFT) Bing, and TripAdvisor rely on ITA for travel information. Other companies -- including priceline.com (Nasdaq: PCLN) and travel deals publisher Travelzoo (Nasdaq: TZOO) -- would feel the sting if Google begins playing a bigger part in reaching out to Web-savvy travel seekers.

In other words, TripAdvisor is no longer interested in sleeping with the enemy.

Google Places doesn't need TripAdvisor, but it obviously helps it beef up its listings until Google cooks up a home-grown solution or acquires Yelp. The bigger concern here is that this is the beginning of the backlash against Google by the travel portals that have historically relied on Google for traffic and leads.

This is a small gesture, but it speaks volumes.

Expedia to spin off fast-growing TripAdvisor unit
Bellevue-based Internet travel agency Expedia said Thursday it plans to split and make its TripAdvisor business a separate publicly traded company.

By Amy Martinez
Seattle Times business reporter
Bellevue-based Internet travel agency Expedia, which is facing intense competition, said Thursday it plans to split in two and make its fast-growing TripAdvisor business a separate publicly traded company.

A stand-alone TripAdvisor would include more than a dozen websites that provide travel-related information.

Expedia would keep its many transaction-based websites, such as Hotels.com, Hotwire and Egencia.

While Expedia makes money from travel bookings, TripAdvisor aggregates opinions and offers user-generated, travel-related content to draw Web traffic and sell advertising. It also is paid a fee when users click through to other, transaction-based websites and make travel arrangements.

Expedia as a whole had $3.3 billion in sales last year, with TripAdvisor accounting for $486 million.

Expedia investors will receive a proportionate amount of TripAdvisor shares in a tax-free deal, the company said. It expects the proposed spinoff to be completed in the third quarter.

Expedia's board approved the planned spinoff but must still sign off on the financial details, the company said. It also is expected to seek shareholder approval.

"We look forward to this next stage and to our continued growth and innovation in inspiring and helping travelers plan the perfect trip," TripAdvisor co-founder and Chief Executive Steve Kaufer said in a statement.

Barry Diller's Internet conglomerate, IAC/InterActiveCorp, bought TripAdvisor, a New England startup, for $210 million in 2004 and folded it into Expedia. TripAdvisor is based in Newton, Mass.

Expedia CEO Dara Khosrowshahi said the split would allow the company to move forward as a pure-play online travel agency.

Expedia announced the proposed spinoff after the end of regular stock-market trading Thursday, prompting its shares to rise 14 percent to $25.51 after-hours.

Fred Moran, an analyst at Benchmark Co. in Boca Raton, Fla., told Bloomberg News the move lets shareholders benefit from the growth at TripAdvisor while Expedia pumps money into marketing and hiring to fend off competition from Priceline.com.



"It's timely with the stock underperforming relative to its peer group," Moran said. "This is just the kind of thing that can give shareholders hope for the stock this year."

Expedia's stock has declined 11 percent this year, compared with a 27 percent increase for shares of Priceline.

Expedia posted a fourth-quarter profit of 25 cents a share in February, down from 35 cents a year ago, though it would have had a per-share profit of 32 cents without one-time costs. The market value of its stock is $6.1 billion based on Thursday's closing price.

Expedia began as an online travel site under Microsoft in 1996 and became a publicly traded spinoff three years later. In 2001, Diller bought Microsoft's majority stake and took over as Expedia chairman. The company started a second life as a publicly traded spinoff from IAC in 2005.

Today, Diller remains chairman of Expedia, and Liberty Media holds an 18 percent stake.

Expedia said it expects "the governance arrangements between Barry Diller and Liberty Media will be mirrored at TripAdvisor" after the spinoff.

Company officials said they'll give an update on the deal when they announce their first-quarter results, likely on April 28.