Weekly Online Travel Agency Notes: Priceline, Expedia, TripAdvisor, Ctrip, Travelzoo

The year-to-date performance of Dow Jones US Travel & Tourism Index showed 0.7% increase. In comparison, the Dow Jones Industrial Average (DJIA) was up 8% year-to-date. The travel industry was by far affected by Ebola, depreciation of the Euro, and oil price fluctuations. However, the online travel industry is expected to grow with the increased penetration of mobile usage, shift from desktop to mobiles and smartphones, declining trends in airfares (which boosts hotel stays and rental cars in addition to sale of air ticket sales) ^[1]

The online travel agencies (OTAs) had gross bookings exceeding $150 billion in 2013, representing 38% of the global online market and 13% of the total market. OTAs have 15% of total hotel sales in the US with around $19 billion of gross bookings and are expected to grow 5-6% over the next two years. OTAs customer segments span across business, leisure, and group. They play multiple roles, such as, marketing engines, booking engines, search engines, and execution platform for customers. ^[2]

Below is a weekly update for some of the online travel companies that Trefis covers.

See Our Complete Analysis for These Companies Here

Priceline

Leading OTA Priceline (NASDAQ:PCLN) reported its Q3 2014 on Nov 4^th (see our earnings article). On the back of economic and financial crises, the company has guided to a slow fourth quarter. However, the company’s fundamentals remain intact with Priceline having the highest  gross booking among the OTAs of $39.6 billion for the first three quarters of 2014. On November 17^th, Priceline Group’s Director Jeffery H. Boyd sold 8,500 shares of Priceline Group stock at an average price of $1,161.22 per share. The director now owns 176,625 shares of the company’s stock worth at around $205 million. The analysts’ estimates of Priceline’s  revenue for FY 2014 is $8.4 billion and earnings per share (EPS) is $52.59, which generates a Price-to-Sales ratio of 7.2 and a P/E ratio of 26.0.

Our price estimate of $1108 for Priceline is slightly below the current market price. We forecast the company to report revenue of approximately $9 billion and net income of $3 billion for FY 2014. Our GAAP and non-GAAP diluted EPS estimates stand at $52.70 and $54.80, respectively.

Expedia

Expedia (NASDAQ:EXPE) acquired Australia-based Wotif Group for $612 million on November 13th (Read Press Release). On November 18^th, the company announced that in partnership with Amadeus, a global distribution company, it will allow customers to purchase branded fares from select airlines in 2015 (Read Press Release). Expedia had a gross booking of $39.2 billion for the first three quarters of 2014. The analysts’ estimates of Expedia’s  revenue for FY 2014 is $5.8 billion and earnings per share (EPS) is $4.09 with a P/E ratio of 26.9.

Our price estimate of $83.84 for Expedia is slightly below the current market price. We forecast the company to report revenue of approximately $6 billion and net income of $464 million for FY 2014. Our GAAP and non-GAAP diluted EPS estimates stand at $3.10 and $4.16, respectively.

TripAdvisor

TripAdvisor (NASDAQ:TRIP), the world’s largest travel review company, introduced a feature facilitating the comparison and reservation of tours and tickets for attractions around the globe on November 13^th. TripAdvisor leveraged its September 2014 acquisition of Viator to introduce the new feature (Read Press Release). The analysts’ estimates of TripAdvisor’s  revenue for FY 2014 is $1.24 billion and earnings per share (EPS) is $1.96 with a P/E ratio of 49.5.

TripAdvisor, on the back of its weak third quarter earnings release on November 4th, experienced a 17% tumble in its stock price, overnight. TripAdvisor’s stock price declined more than 40% since late August. Our valuation of $93.55 for TripAdvisor is around 30% higher than the current market price of $71.45. Our 2014 revenue and net income estimates for the company stand at $1.27 billion and $366 million, respectively. Our GAAP and non-GAAP diluted EPS estimates stand at $2.50 and $2.80, respectively.

Ctrip

Ctrip (NASDAQ:CTRP), the Chinese OTA giant, will release its Q3 2014 earnings result next week. The company’s stock buy rating has been recently reaffirmed by Deutsche Bank in their report released on November 20^th. Deutsche Bank has a $70.00 price target on Ctrip, down previously from $77.00. The recent expansion of partnership between Ctrip and Priceline will help Ctrip in expanding its global footprint and in turn generate more profitability. The analysts’ estimates of TripAdvisor’s  revenue for FY 2014 is $1.19 billion and earnings per share (EPS) is $0.67 with a P/E ratio of 62.13.

Our $54.55 valuation for Ctrip is at a slight discount to the current market price. For FY 2014, we forecast revenue, net income and diluted non-GAAP EPS of approximately $1.27 billion, $63 million and $1.72, respectively.

Travelzoo

Travelzoo’s (NASDAQ: TZOO) stock price experienced a downhill trend since mid-September. The stock price has fallen by around 40% since late August. The company suffered further after posting a weak Q3 2014 performance on October 16, where its revenue fell by 10% year on year to $33.5 million, mainly due to the weak performing Search and Local Deals division. Currently, Travelzoo is in a transition phase with new product developments and strategy changes. The company is developing its new hotel booking website, repositioning itself from a discount offer dealer to selling packages based on client needs. The analysts’ estimates of Travelzoo’s  revenue for FY 2014 is $145 million and earnings per share (EPS) is $0.65 with a P/E ratio of 10.12.

Our valuation of $21 for TZOO is more than 60% higher than the current market price. We expect the company to report revenue and GAAP net income of $151 million and $17 million this year, respectively. Our GAAP diluted EPS forecast for TZOO stands at $1.10.

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More Trefis Research

1. The Online Travel Industry: Investing Essentials, Motley Fool, Aug 2014 [↩]
2. Online Travel Agencies: More Than a Distribution Channel, PhocusWright, Nov 2014 [↩]