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

PCLN: Priceline Group logo
PCLN
Priceline Group

This week, there have been a few strategic alliances and new launches in the online travel agency space. Priceline (NASDAQ:PCLN) announced the integration of Apple Pay on its iPhone and iPad iOS 8 applications. The company also launched the redesigned version of its restaurant booking platform. Expedia (NASDAQ:EXPE) entered into a collaboration with leading hotel chain, Best Western hotels, while its corporate travel division enhanced its partnership with iJET international. Ctrip (NASDAQ:CTRP) expanded its partnership (initiated in May 2014) with online leisure company, Tuniu Corporation. Ctrip also  announced that it might wage a price war in China and has kept aside $162 million for that purpose. Below we give a quick rundown on the most notable events in the last week related to these companies.

See Our Complete Analysis for These Companies Here

Priceline

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Priceline (NASDAQ:PCLN) recently received an “A” rating from Morningstar, which implies that the company is at a low risk of default. The market capitalization for the company stands at $59 billion and the 52 week high and low for the company has been $1,378.96 and $1,017.28, respectively.

On December 11, Priceline announced the integration of Apple Pay in its recently updated iPhone and iPad app for iOS 8. Priceline is the first prominent OTA provider to offer such an option. This integration would enable customers to pay for deals on Priceline through Apple Pay (See press release here). The company also announced the launch of a redesigned version of its restaurant booking website, OpenTable. The redesigned website is now available to diners in the U.S., Canada, Germany, Japan, Mexico and the UK.

Our price estimate of $1108 for Priceline is slightly below the current market price. We expect the company to report a 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. The consensus estimate for Priceline’s revenue for FY 2014 is around $8.5 billion and earnings per share (EPS) is $52.59. Priceline’s stock declined by almost 4% over the week through Thursday.

Expedia

On December 10, Expedia (NASDAQ:EXPE) signed a partnership to distribute hotels from Best Western, a top international hotel chain, on its website. Expedia features over 150 travel sites in around 70 countries, while Best Western has around 4,000 hotels in over 100 countries (Read Press Release). On Dec 8, Expedia’s corporate travel business, Egencia, expanded its global partnership with iJET International, Inc., a top traveler security provider. As a part of this agreement, Egencia customers subscribing to iJet travel risk management services will be provided with upgraded services (Read Press Release).

Expedia in collaboration with Airlines Reporting Corporation (ARC) released a report detailing air travel trends for 2015, on December 9 (Read Press Release).

Expedia shares received an average “Buy” rating by twenty-three analysts presently covering the company, Analyst Ratings Net reports. Our price estimate of $84 for Expedia is slightly below the current market price. We forecast the company to report a revenue of approximately $6 billion for FY 2014. Our GAAP and non-GAAP diluted EPS estimates stand at $3.10 and $4.16, respectively. The consensus estimate for Expedia’s revenue for FY 2014 is around $5.8 billion and EPS is $4.09. Expedia’s stock had a negligible decline of 0.24% over the week through Thursday.

TripAdvisor

On December 9, TripAdvisor (NASDAQ:TRIP), the world’s largest travel review company, announced its top contributors of 2014, based on user submitted reviews. TripAdvisor was upgraded by TheStreet analysts from a “hold” to a “buy” rating on December 8.

Earlier, the company experienced a 17% tumble in its stock price after its weak third quarter earnings. TripAdvisor’s stock price declined more than 40% since late August. Our valuation of $94 for TripAdvisor is around 30% higher than the current market price of $71.45. Our 2014 revenue estimate for the company stand at $1.27 billion. Our GAAP and non-GAAP diluted EPS estimates stand at $2.50 and $2.80, respectively. The consensus estimates for revenue and EPS stand at $1.24 billion and $1.96, respectively. TripAdvisor’s stock declined by around 2% over the week through Thursday.

Ctrip

On December 10, Ctrip (NASDAQ:CTRP) expanded its partnership (initiated in May 2014) with Tuniu Corporation, a China based online leisure company. Earlier, Ctrip’s hotel resources were available on Tuniu’s platform. The enhanced partnership will further allow Ctrip’s flight ticketing and car rentals to be available to Tuniu’s leisure travelers. [1]

On a separate note, the Chinese online travel market seems to be launching into a price war. Last week, Ctrip’s CEO Liang Jianzhang announced that the company is keeping aside RMB 1 billion ($162 million) to undercut prices and offer zero profit services. [2] Ctrip currently has over 50% revenue share in the Chinese OTA market.

We have recently revised our Ctrip price estimate to $43.11 which is at a 22% discount to our previous price estimate, taking into account the decline in its margins and increases in spending over the first three quarters of 2014.

Our price estimate is almost in line with the current market price. For FY 2014, we forecast a revenue of approximately $1.27 billion, whereas the consensus estimate for the revenue stands at $1.19 billion. Ctrip’s stock declined by around 9% over the week through Thursday.

 

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Notes:
  1. Tuniu and Ctrip Sign Strategic Collaboration Agreement, Nasdaq, December 2014 []
  2. Qunar and Ctrip trading barbs, headed for a price war, TechInAsia, December 2014 []