Susquehanna Downgrades Expedia: 'It Could Take Several Quarters To Resolve These Issues'

Expedia Inc (NASDAQ: EXPE) shares were down at the end of Monday's session after Susquehanna dropped its bullish stance on the online travel agency. 

The Analyst

Shyam Patil downgraded Expedia from Positive to Neutral and lowered the price target from $170 to $141.

The Thesis

While he is still constructive on the long-term online hotels and alternative accommodations space, Patil said he does not see a catalyst to move Expedia shares higher and is not expecting upward estimate revisions in the near-term. (See the analyst's track record here.) 

“Moreover, EXPE is facing some challenges in one of its key growth drivers- Vrbo (formerly HomeAway), as the brand transition and SEO headwinds appear to be weighing on bookings growth; we believe it could take several quarters to resolve these issues." 

Shares are likely to remain rangebound in the nerm-term, Patil said.

Expedia reported first-quarter earnings last week, delivering mixed results that included a big sales miss.

Fortunately for the company, lower operating expenditures offset the revenue miss, and EBITDA of $176 million came in 28 percent above consensus estimates.

Room nights fell in-line, but softness at Vrbo introduces some uncertainty around the outlook, Patil said. 

“Looking ahead, EXPE appears constructive on the core lodging nights growth trajectory, but headwinds from the AWAY to Vrbo transition are likely to remain for the next couple quarters." 

Price Action

Expedia shares were down 2.37 percent at $124.09 at the time of publication Monday. 

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