Analyst reports: Wall Street takes off with travel site Expedia

The online travel company's stock surges nearly 50 percent a day after the company shocked Wall Street with a scorchingly strong quarterly performance.

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Expedia stock surged nearly 50 percent Tuesday morning, a day after the online travel company shocked Wall Street with a scorchingly strong quarterly performance.

The Bellevue, Wash.-based Microsoft spinoff announced Monday that it lost 4 cents per share, excluding charges, in the fiscal first quarter ended Sept. 30. Analysts polled by First Call/Thomson Financial expected Expedia to lose 26 cents per share.

The company, which became a separate corporation Oct. 1, 1999, reported a loss of $1.6 million, or 4 cents per share, excluding noncash charges. It lost $16.8 million in the same period last year.

Shares got a boost in after-hours trading Monday, jumping $2.32, or almost 26 percent, to $11.38 in the extended session. They continued to rocket upward Tuesday morning, trading at $13.31, or 46.9 percent higher than their price at the end of regular trading Monday.

Even with the recent boost, the stock is a far cry from its 52-week high of $65.87. But it's a significant gain from its 52-week low of $7.75, which it hit in early October.

Analysts were bullish on Expedia's prospects for future stock boosts. Four financial institutions drafted bullish reports predicting that Expedia stock could hit as much as $30 per share within the next year.

Analysts Steve Weinstein and Allison Hamilton at Pacific Crest Securities upgraded Expedia to "strong buy" from "buy."

Paul Keung at CIBC World Markets raised Expedia to "strong buy" from "buy." His 12-month target price is $20 per share.

Mark Rowen at Prudential Securities reiterated his "strong buy" rating and his 12-month target price of $24 per share. Thomas Underwood V at Legg Mason Wood Walker reiterated his "buy" rating and his 12-month price target of $30 per share.

Goldman Sachs analysts Tonia Pankopf and Joshua Fagen were among the few analysts to tout Expedia in the days leading up to the Monday earnings report. They penned a research note on Friday that hailed Expedia as a "tremendous market opportunity."

"Because of the nature of travel products and services, which are highly information intensive and personalized, involve a large number of buyers and sellers, and do not require the physical delivery of goods, Expedia addresses one of the largest and most attractive markets online," the analysts wrote in a research note.

But Expedia and other travel sites are not without significant challenges. Airlines have grabbed the majority of online ticket sales through their own sites.

Airlines have increasingly plowed research money into their sites, beefing up flight selections and online customer-loyalty programs. That has forced Expedia and other independent travel sites to focus instead on package tours, cruises and hotel rooms, and complete travel itineraries for small-business travelers.

Sales from airline Web sites will account for 58 percent of total online air travel bookings this year, a 5 percent jump from last year, according to a report released in early October by travel research company PhoCusWright.

But the online travel business is so large that airlines cannot grab all of the market. Sales of airline tickets online are expected to grow 85 percent from last year, the PhoCusWright report found.

Total Internet sales for major U.S. airlines will reach $8.7 billion in 2000, up 85 percent from 1999 revenues of $4.7 billion, according to Sherman, Conn.-based PhoCusWright.

The World Travel and Tourism Council estimates that global spending on travel and tourism, which reached $3.7 trillion in 1999, will soar to $7.5 trillion in 2010.