Expedia Inc. (EXPE:US), an online travel agency, plunged the most in eight years after increased competition led it to miss second-quarter sales and profit estimates.
The stock slumped (EPXE:US)27 percent to $47.20 at the close in New York, for the biggest decline since July 21, 2005. The stock, which is down 23 percent so far this year, was the worst performer in the Standard & Poor’s 500 Index today.
Expedia is competing with Orbitz Worldwide Inc. (OWW:US), Priceline.com Inc. (PCLN:US) and TripAdvisor Inc. (TRIP:US) for travelers seeking to book trips online. TripAdvisor has introduced a new search product that’s drawing traffic away from Expedia, which was spun out of Barry Diller’s IAC/InterActiveCorp (IACI:US) in 2005. Expedia, in which Diller still holds (EXPE:US) a 3.6 percent stake, is also suffering from poor performance at its Hotwire unit, according to Aaron Kessler, an analyst at Raymond James & Associates Inc. in San Francisco.
“The industry is getting more competitive in the U.S. and Europe,” said Kessler, who rates Expedia shares the equivalent of a buy.
Net income slumped 32 percent to $71.5 million, or 51 cents a share, from $105.2 million, or 76 cents, a year earlier, Bellevue, Washington-based Expedia said in a statement yesterday. Excluding some items, earnings were 64 cents a share. Analysts had estimated 81 cents on average, according to data compiled by Bloomberg.
Revenue rose 16 percent to $1.21 billion last quarter, missing the $1.26 billion estimated by analysts.
“We knew we were facing second-quarter headwinds and those which we expected, as well as some we didn’t, materialized,” Chief Executive Officer Dara Khosrowshahi said in the statement. “Despite this, we remain confident about our long-term strategy.”
Priceline has boosted efforts to promote its Booking.com service in the U.S. as well, spending more than $1 billion annually in the hotel-booking market.
TripAdvisor’s new meta search product, which provides a single online travel agent recommendation instead of deals from all online travel agents, has reduced traffic to Expedia and other agents it partners with, according to Brian Fitzgerald, an analyst at Jefferies & Co. in New York.
“Instead of popping up five sites, they’re sending one lead out the door, so now it’s just a window,” said Fitzgerald, who has a hold rating on the shares.
Expedia hasn’t been able to adapt to this disruption in traffic by adjusting their price for TripAdvisor’s leads, Fitzgerald said.
Shares in TripAdvisor rose 4 percent to $73.95.
“We think Priceline.com has a good idea on what to pay for the new leads, but we don’t think Expedia has figured out what they’re willing to pay,” Fitzgerald said. “They’ve dropped budget as they’ve wrestled with this.”
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