Tourism Industry News

The global slowdown in travel is likely to be worse than expected

04/11/2008 18:31

As Expedia Inc. reported a 4.8 percent drop in quarterly net profit, a report shared that there has been a "scurrying to revalue the online travel stocks".


"Expedia observed on its post-earnings conference call that the softness the company had been seeing in the US and the UK earlier in the year has now extended to "nearly all" geographies and all key product areas, including air, hotels and car rentals.


The company indicated that transactions dropped off during the week Lehman went bankrupt, and have not rebounded much since," reported "This morning (October 31), several analysts cut ratings on the stock."


It was noted that Citigroup's Mark Mahaney lowered his view to Hold from Buy, and chopped his price target to $12 from $29. Meanwhile, Bank of America's Brian Fitzgerald and Brian Pitz lowered their rating to Neutral from Buy, while cutting their price target to $12 from $19. They cited a "belief that the global slowdown in travel is likely to be significantly worse than expected, along with worse than expected currency headwinds."


Last week, Expedia said its third-quarter net profit was $94.8 million, compared with $99.6 million a year earlier. "Yes, it's a difficult environment, but that's everyone's news, and for travel any predictions about its depth or duration would be foolish," Barry Diller, Expedia, Inc.'s chairman and senior executive had said. "What is important for shareholders of Expedia to know is that the company is well capitalised, focused only on operating its sole travel services business, with no distractions, and a conviction that it will emerge stronger in every line of its business."


According to, the Bank of America analysts also cut their rating on Priceline to Neutral from Buy, chopping their target to $60 from $90.


Douglas Anmuth, Internet analyst at Barclays Capital, cut his rating today on Orbitz (OWW) to Equal Weight from Overweight, reducing his target to $3, from $9. Anmuth reportedly said: "Orbitz is likely to suffer disproportionately during the downturn" given its higher exposure to air and far less exposure to ad revenue. He adds that the company's diversification moves will be "more challenging" in the current macro environment given pressure on hotel rates and fees and softening in international markets.


Related link TravelWeekly



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