Morgan Keegan Initiates Expedia At Outperform (EXPE)

In a research report released today, Morgan Keegan equity analyst Justin Patterson initiated shares of Expedia EXPE at Outperform with a $30.00 price target. During Tuesday's trading session, EXPE shares closed 3.03% lower at $24.64. The report is quite detailed and focuses on a number of key catalysts for the stock. The analyst cited positive long-term international expansion, the TripAdvisor opportunity and valuation for the Outperform rating. He wrote, "we believe Expedia is on pace to grow international bookings by +30% Y/Y in 2010E and +17% Y/Y in 2011E." Furthermore, "while we don't foresee Expedia overtaking Booking.com internationally, we do believe Expedia can become a strong #2 abroad and this gives us confidence in projections for >10% revenue and EPS growth through 2012E." Morgan Keegan believes that TripAdvisor, which is a leading web 2.0 site for travel reviews, and operates under the EXPE umbrella, can achieve revenue growth of at least ~20% per annum for the next 3 years. Based on the Morgan Keegan thesis, the monetization of TripAdvisor will account for a significant portion of projected revenue growth at EXPE. They believe that this asset is being under appreciated by the Street. The final catalyst that the analyst cites is a relatively cheap valuation. At 13X 2011E EPS, the stock is trading at a slight premium to the S&P (~12X), but are still considerably less expensive than EXPE's 5-year median P/E of 15X. Morgan Keegan believes that an appropriate valuation for the company would be 16X forward earnings considering EXPE's growing international presence, under appreciated TripAdvisor asset, and a history of share repurchases.