RBC Capital Reiterates Bullish view on Expedia (EXPE) Following Analyst Day

RBC Capital analyst, Mark Mahaney, attended Expedia's (NASDAQ: EXPE) analyst day. No change to Outperform rating or $165 PT.

Expedia hosted its first investor day in well over a decade with a focus on the overall travel market, Expedia’s strategy, the company’s long-term financial model, and the current integration of recent acquisitions. The information presented was not materially new, but a good re-iteration of what management has said in the past.

Management called out the following investment highlights:

1) A huge addressable market - $1.4T opportunity of which Expedia only has single-digit market share (11% in the U.S. and low singledigit % ROW)

2) Large and diversified platform – with very broad supply (269k hotels, 1.2MM Vacation Rentals; 475+ airlines; 150+ car rental agencies; 15k unique activities) and strong demand (450MM+ monthly visitors in 75+ countries)

3) Scale advantages – especially on marketing spend ($2.7B in 2015) and ability to test / innovate

4) Leading brands – including Expedia (full-service OTA), hotels.com (hotel specialist), Egencia (business travel), HomeAway (vacation rentals) and Trivago (hotel metasearch)

5) Strong financial performance – with 22% Gross Bookings CAGR (’12-’15, ex-eLong) and management indicating sustained EBITDA margin expansion is possible by 2018 (likely conservative, we believe)

6) Track record of successful M&A and capital allocation – including the recent Travelocity, Wotif, Orbitz, and HomeAway deals, while repurchasing shares worth ~$0.6B (2014-2015) and maintaining a dividend (one of the few Internet companies to do so)

7) Significant attach rate opportunity – EXPE believes its substantial air ticket sales provide it with a unique crosssell/attach-rate opportunity, noting that it has already experienced a 50% increase in its attach rates over the last three years and that rail offers a new opportunity

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 $114.30 yesterday.

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