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HomeAway Soars on Solid Earnings

Stock reaches 52-week high and has strong prospects


HomeAway (NASDAQ:AWAY), which operates a marketplace for rental properties, posted a solid earnings report yesterday. On the news, the shares are up double digits to around $28, reaching a new 52-week high. The company came public in mid-2011 for $27 a share.

In Q4, HomeAway’s revenues climbed by 22% to $71.6 million and its EPS went from break-even to 5 cents per share. The Street was looking for revenues of $70.9 million and an EPS of 4 cents.

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All in all, HomeAway continues to benefit from the network-effects of its marketplace, which includes about 712,000 listings across 171 countries. As seen with other marketplaces like eBay (NASDAQ:EBAY), it can be extremely tough to dislodge a global leader once it has a base.

Marketplaces also tend to generate substantial amounts of cash flow … and this is the certainly the case for HomeAway. During the past year, the company generated cash flows of $85 million — an increase of 32%. Plus, it has about $270 million in the bank.

HomeAway has also been changing its pricing, allowing for different tiers that are based on the levels of service. The move should help to improve revenues and cash flows as well.

Going forward, though, the biggest driver could be the improvement in the U.S. economy, as it will likely mean a boost in travel. As seen with strong performances of online travel stocks like Expedia (NASDAQ:EXPE) and TripAdvisor (NASDAQ:TRIP), the sector looks poised for continued growth.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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