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

PCLN: Priceline Group logo
PCLN
Priceline Group

Some of the online travel companies, including Priceline (NASDAQ:PCLN) and Expedia (NASDAQ:EXPE)  recently received a favorable ruling from the Hawaii Supreme Court. The ruling might enable them to retrieve a part of the $247 million penalty they had earlier paid to the Hawaiian state government. Priceline recently announced that it has approved a “proxy access” amendment to its bylaws that will allow its prominent investors to have more representation on the company’s boards. TripAdvisor‘s (NASDAQ: TRIP) recent surveys depicted the rising demand for vacation rentals among its U.S. based users. Ctrip International (NASDAQ: CTRP) recently released its fourth quarter financial reports. The company witnessed an above expected growth in its top line. However, Ctrip’s bottom line is still under pressure due to heavy investments.

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

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Priceline

On March 19, Priceline (NASDAQ:PCLN) announced that it has approved a “proxy access” amendment to its bylaws that will allow eligible shareholders to have their nominees listed in Priceline’s proxy statement. This rule change will enable more of the company’s investors to acquire a seat on its board. The amendment is applicable for a group of up to 20 shareholders who collectively own at least 5% of Priceline stock for at least 3 years. These shareholders can nominate directors constituting up to 20% of the number of directors then serving on Priceline’s board. Over the last month, companies such as General Electric (NYSE:GE), Citigroup (NYSE:C), and Prudential (NYSE:PRU) have taken similar steps, though each of these companies set an even lower ownership threshold of 3%. [1]

Our price estimate of $1036 for Priceline is around 13% lower than the current market price. We expect the company to report revenues of approximately $10 billion and net income of $3.16 billion for FY 2015. Our GAAP and non-GAAP diluted EPS estimates stand at $57 and $60, respectively. These estimates are almost in line with the consensus analysts’ estimates. Priceline’s stock experienced around 2% rise over the last week.

Expedia

Expedia (NASDAQ:EXPE) recently launched an online campaign targeted towards answering online-travel related queries of the millennial travelers. The advertisements titled “Expedia Interns,” features two characters named Jay and Stuart. These two men answer travel related questions posted on Twitter by young travelers. Potential travelers are being asked to tweet their travel questions to @Expedia at #ExpediaInterns. [2]

On March 17, in a case involving the state against nine online travel companies, including Expedia, Travelocity (which is now a part of Expedia), and Orbitz (which Expedia is planning to acquire soon subject to regulatory approvals), the Hawaii Supreme Court passed a ruling that the companies are not required to pay Hawaii’s hotel room tax. The court stated that though it is imperative for the companies to pay the state’s general excise tax, they are not required to pay the transient accommodation tax.

The online travel companies paid assessed penalties totaling  $247 million from 2000 to 2010. The money is currently in a special litigation fund, with the state treasury. The Travel Technology Association, which comprises of companies such as Expedia and Priceline, noted that the Hawaii Supreme Court ordered the state of Hawaii to refund the online travel companies with the assessed penalties.

Our price estimate of $90 for Expedia is 6% below the current market price. We forecast the company to report revenues of approximately $6.6 billion for FY 2015. Our GAAP and non-GAAP diluted EPS estimates stand at $3.6 and $4.7, respectively. These estimates are in line with the consensus analysts’ estimates. Expedia’s stocks witnessed a growth of around 5% over the last week.

TripAdvisor

TripAdvisor (NASDAQ:TRIP) recently announced the outcomes of its annual vacation rentals survey, that included over 1,800 U.S. based respondents. The survey highlighted that around 59% of the respondents are planning to book vacation rentals in 2015, up from the 52% travelers who stayed in vacation rentals in 2014. 87% of the surveyed respondents gave a preference to vacation rentals owing to the increased availability of online information, such as traveler reviews and photos. The top reason for travelers to be more inclined towards booking vacation rentals (as compared to hotels) were: more living space, lower prices, better amenities, and more of at-home experience. (Read Press Release).

On March 18, TripAdvisor launched an online travel review guide. The guide includes tips on writing reviews that is based on a survey of over 100,000 travelers and hospitality business owners. According to Barbara Messing, TripAdvisor’s Chief Marketing Officer, over 50% of total global travelers, base their travel booking decision after reading reviews and almost 70% of the surveyed businesses admitted to have taken steps to improve their service, based on travelers’ reviews. With over 200 million reviews on the TripAdvisor website, the world’s largest travel review site wanted to improve its review qualities so that it further helps both travelers and hoteliers. (Read Press Release).

Our valuation of $87 for TripAdvisor is almost near the current market price. Our 2015 revenue estimate for the company stands at $1.7 billion. Our GAAP and non-GAAP diluted EPS estimates stand at $2.7 and $3.2, respectively. These estimates are almost in line with consensus analyst estimates. TripAdvisor’s stock price experienced around 5% rise over the last week.

Ctrip

Ctrip International (NASDAQ: CTRP) shares were up nearly 10% after the announcement of its Q4 2014 earnings on March 19th. [3] The company displayed above guidance top line growth, though the bottom line remained dampened. At $308 million, net revenues for Q4 2014 grew by 33% year on year , exceeding company guidance of 30% growth. However, the revenue boost came at the cost of bottom line erosion, due to increased investment in product development and marketing efforts. As a result, net loss attributable to Ctrip’s shareholders was $36 million, as against a net income of $43 million in the same prior year period. [4]

Ctrip has guided to net revenue growth of 40-50% for Q1 2015. The company admitted that currently the Chinese online travel market environment is aggressively competitive. However, with its innovation, technological advances, alliances, and open platform development, the company plans to emerge ahead of this competition. Ctrip is planing  for strong bottom line growth by the year 2020, with 20%-30% operating margins. Read more about Ctrip’s fourth quarter earnings here.

We are in the process of updating our valuation of $43 for Ctrip .Ctrip’s stock price experienced a whopping 31% growth over the last week.

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Notes:
  1. Priceline to Allow Proxy Access for Big Investors, NASDAQ, March 19, 2015 []
  2. Expedia launches campaign featuring two doofuses to demystify travel for millennials, GeekWire, March 16, 2015 []
  3. Ctrip.com Surge 8% As Q4 Results Top View, Guides Q1 Revenue Growth Above View, RTT News, March 19, 2015 []
  4. Ctrip Reports Unaudited Fourth Quarter and Full Year 2014 Financial Results, Ctrip Investor Relations, March 19, 2015 []