Selling Pressure Could Ramp Up On This Underperforming Travel Stock

Short-term options traders have rarely been more call-skewed on EXPE

Nov 14, 2017 at 10:16 AM
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Expedia Inc (NASDAQ:EXPE) delivered disappointing third-quarter earnings in late October, driving the travel stock to gap below a trendline that's contained pullbacks since 2013. EXPE also gapped below its 160-day moving average, which had held for most of the stock's recent rally, and the equity is now staring at a negative year-over-year return, underperforming the broader equities market. The downturn seems to be a broader sector trend, with rival travel stock Trivago (TRVG) also tanking since its initial public offering (IPO).

EXPE stock chart WKALT


For all of Expedia's struggles lately, analysts remain optimistic. Of the 24 brokerages covering EXPE, 19 rate the shares a "buy" or "strong buy." Furthermore, the equity's average 12-month price target of $154 represents a 22% premium from the stock's closing price of $120. Continued technical struggles could prompt analysts to issue downgrades or price-target cuts, exacerbating selling pressure on EXPE.

Short sellers have been racing to cover their tracks, yet EXPE has failed to capitalize. This suggests a lack of organic buyers for the shares.

In the options pits, trading has been heavily call-skewed. EXPE's Schaeffer's put/call open interest ratio (SOIR) of 0.53 ranks in the lowest percentile of its annual range. This indicates that short-term calls haven't been more popular, relative to puts, in the past year. Should EXPE continue to slide, it could lead to an unwinding of these bullish bets.

Subscribers to Schaeffer's Weekend Trader Alert options recommendation service received this EXPE commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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