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The company books around 200 million room nights per year. Expedia has continuously gained share of the $1 trillion global travel market and the company is investing to gain a greater share of the international travel market.
Expedia is aggressively investing in its international offerings, with hotels leading the way. Expedia currently has a presence in 200 countries.
Although air is a lower margin business overall, it is a strategic priority for Expedia as air bookings often create hotel and car rental reservations.
EPS is set to grow 10-20% per year for the next few years on low-teens revenue growth. Revenue just cleared $10 billion this past year. Earnings are closing in on $6.
Management decided to make some investments for the future and lower near-term profit expectations, which sent the stock down to 52 week lows. We feel this is the perfect time to accumulate this powerhouse in the travel industry.
When these investments pay off, the return to a reasonable low-20’s P/E multiple on $6 worth of EPS is going to generate us pleasant gains. The market cap is only $16 billion, so is really quite small in the whole scheme of things.
The stock actually hit $161 last summer and we expect this high to be reached in the future. We are placing a price target of $125 on the stock to start, with a sell price of $90.
Todd Shaver is editor of BullMarket.com.
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