Expedia Inc (EXPE) Stock Set to Soar In Online Travel

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Find a strong rivalry and you’ve got a recipe for drama. In the stock market, that drama turns into profit whenever you can pair two stocks and let them pull your portfolio through the competitive cycle. I’m talking about Expedia Inc (NASDAQ:EXPE) and Priceline Group Inc (NASDAQ:PCLN).

Expedia Inc (EXPE) Stock Set to Soar In Online Travel

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At the moment, it looks like EXPE stock offers a little more growth potential than PCLN, which is why I think now is a good time to overweight the smaller EXPE stock and lighten up on the giant.

It’s true that EXPE stock is an underdog in the world of online travel. The overall business is only 80% the size of Priceline’s and the company’s efforts to get the upper hand in overseas markets have lagged in the past few years, due in part to the strength of the dollar and the turbulent economies of China and Europe.

That said, a few important factors differentiate the two equities, both on and off the price charts.

EXPE Stock Is Underloved

Sentiment on EXPE stock has been cautious at best. Wall Street consensus on 2017 earnings has reeled back 20% over the past two years and the anticipated ramp for the future has also come down significantly. There just isn’t a lot of buzz compared to PCLN, which still commands a price near 40 times current earnings (compared to EXPE’s modest 19 times multiple).

But I’m sensing an opportunity here as the winds shift and the underdog catches up to the leader. While the overseas markets aren’t huge, they’re growing at a much faster rate than what the mature U.S. environment can provide. When the global tide turns and currency rates favor these flights again, EXPE is looking at the kind of fast expansion that booking companies haven’t seen since the initial dot-com boom changed U.S. travel forever.

Even now,  EXPE looks like a better buy at these levels. Any stock priced that far above the industry and broader market has already run up a long way and is probably closer to being overextended. Plus, PCLN’s anticipated growth simply doesn’t support that sky-high multiple.

Maybe PCLN can grow its bottom line another 10% to 15% per year for the foreseeable future, but EXPE is easily looking at earnings growth double to triple that range.

Bottom Line on EXPE Stock

From a technical perspective, EXPE is oversold and bouncing off support. After forming a base near the 200-day moving average, we’re starting to see a rally on increasing volume.

The move is in conjunction with a Relative Strength Index (RSI) crossover buy signal, and when the two are found together the short-term outlook for a stock is very bullish.

If consensus for EXPE stock is as realistic as it gets and still looks pretty good, that’s traditionally a buy. Even those same analysts who have slashed their earnings targets on Expedia shares generally concede that the stock is still worth around $140, if not a little more.

PCLN, meanwhile, looks like it’s getting close to its long-term ceiling where further upside will get harder to find. The bottom line: If you had to buy just one company in the online travel space, EXPE seems to have stronger potential to outperform in the future.

Hilary Kramer is the editor of GameChangersBreakout Stocks Under $10High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.


Article printed from InvestorPlace Media, https://investorplace.com/2017/01/expedia-inc-expe-stock-set-to-soar/.

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