Wall Street Weighs In On Expedia, Priceline, Tripadvisor

Susquehanna initiated coverage on EXPE, PCLN, and TRIP

Oct 20, 2016 at 11:46 AM
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Travel stocks haven't received much love recently on Wall Street. According to our internal Sector Scorecard, the percentage of analyst "buy" ratings has decreased 5 percentage points year-over-year. Not to mention, the average Schaeffer's put/call open interest ratio (SOIR) registers at a put-tilted 1.13, while short interest accounts for 8.6% of the average stock's float under our "Leisure" umbrella. Today, opinions are once again flying on travel stocks, including Expedia Inc (NASDAQ:EXPE), Priceline Group Inc (NASDAQ:PCLN), and Tripadvisor Inc (NASDAQ:TRIP).

Overnight, Susquehanna started coverage on EXPE with a "positive" rating and a $160 price target -- in record-high territory -- while Pacific Crest upped its assessment to "overweight" from "sector weight." In fact, the latter called the stock the "best longer-term risk/reward in the space" (subscription required), citing the earnings potential of the firm's vacation rental business, HomeAway.

As alluded to, travel stocks in general haven't earned much respect, but this hasn't been the case for EXPE. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, the stock has amassed a 50-day call/put volume ratio of 1.58 -- just 1 percentage point from an annual peak. Additionally, the shares have garnered 12 "buy" or better ratings, more than doubling its five "hold" or worse assessments.

Technically speaking, Expedia Inc is only about 7% higher in 2016, last seen up 0.4% at $125.19. However, relative to its early February low at $88.40, the leisure stock has surged 42%, and is poised for its highest closing price of the year.

PCLN got some love from Susquehanna, as well. Specifically, the brokerage firm initiated coverage with a "positive" rating and a $1,700 price target -- representing uncharted waters. The shares are failing to capitalize on the bullish note, down 0.3% at $1,465.07, but as recently as Oct. 5 they hit a record high of $1,501.79 -- and could rally more if past is prologue.

While analysts are largely in PCLN's bullish corner, options traders appear to be anything but hopeful. The travel stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.01 outstrips 80% of all readings taken in the last year. However, given Priceline Group Inc's strong technical backdrop, it's possible shareholders have been picking up puts to hedge against a surprise near-term drop.

Rounding things out, TRIP was initiated at Susquehanna with a "neutral" rating and a $55 price target -- a discount to current trading levels. At last check, the shares have shed 2.1% at $62.50 -- and have underperformed long-term, too, with a 2016 deficit of 24%.

In other words, the prevailing skepticism toward Tripadvisor Inc is well-deserved. For example, 16 of 17 analysts rate the travel stock a "hold" or worse, nearly 15% of its float is sold short, and its 10-day ISE/CBOE/PHLX put/call volume ratio of 1.55 ranks just 16 percentage points from a 12-month peak.

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