Expedia (EXPE) Trends Show Weak Europe, Neg Readthrough for Priceline (PCLN) - RBC

RBC Capital analyst, Mark Mahaney, reiterated his Outperform rating on shares of Expedia (NASDAQ: EXPE) but cut his price target to $160.00 (from $165.00). Q2 results were 2%/4% below Street on Revenue/Bookings, but 12% above on EBITDA. Organic Room Night growth decelerated 12pts to 12% Y/Y, materially below expectations due largely to execution. With Orbitz integration largely done and ramping HomeAway results, fundamentals should improve 2H. Mgmt was cautious re: EU travel trends incrementally negative for Priceline (NASDAQ: PCLN) next week.

Keys to the quarter:

1) Weak Unit Growth– Organic Room Night growth decelerated 12-pts in Q2 (to 12%Y/Y) - about 2x the amount management had been expecting –due to ‘self-inflicted’ issues associated with the Orbitz integration and potentially competitive and/or macro headwinds

2) Organic Bookings Growth– Decelerated to 9% Y/Y vs. 12% Y/Y in Q1

3) Acquisitions Integrations Are Ahead of Plan– Mgmt commentary on the call was positive re: both Orbitz and HomeAway momentum, noting both are ahead of plan

4) HomeAway Ramping– Traveler fee has been rolled out in all major markets and. HA Revenue grew 36% Y/Y, with growth expected to accelerate in 2H16

5) EU Travel– Management noted France, Turkey and other EU "summer sun destinations” are down, largely due to terrorism. This is a negative data point for PCLN print next week.

For an analyst ratings summary and ratings history on Expedia click here. For more ratings news on Expedia click here.

Shares of Expedia closed at $119.27 yesterday.

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