Goldman Sachs Color On EXPE 4Q

Expedia, Inc. EXPE reported in-line 4Q bookings and revenue, “though OIBA and EPS missed our estimates even after adding back $10 mn in one-time item,” Goldman Sachs reports. “Full-year 2011 OIBA growth guidance of mid-single-digit growth compared to our prior estimate of +12%,” Goldman Sachs writes. “Expedia reported 4Q bookings, revenue, OIBA, and EPS of $5.8 bn (+14% yoy), $808 mn (+16%), $175 mn (+7%), and $0.32 (+9%). Domestic bookings grew 13% yoy, while international grew 16% yoy (19% ex-FX). “Global hotel room nights were up 15% yoy, from up 14% yoy in 3Q. 4Q net revenue rate increased 23 bp yoy. 2010 OIBA growth was 9% yoy (10% ex-one-time items, in-line with full-year guidance). On about 1% lower bookings and revenue, but lighter margins on more reinvestment, we lower 2011/2012E EPS by around 6% to $1.92/$2.19. We introduce 2013E EPS of $2.49.” Goldman Sachs said that the implications include: (1) “While we accept that the company is investing in new products and geographic areas to drive future growth, we anticipated more leverage on growing ADRs in 2011, and see risk that higher investment levels continue into 2012.” (2) “TripAdvisor revenue grew 35% yoy in 4Q and 38% in 2010. Management expects click growth to be in the mid-20% range or greater, though margins should drop several hundred bp due to investments in new products, such as SniqueAway, vacation rentals, and mobile.” (3) “ADRs grew 2% yoy, while revenue per room night was flat yoy. We believe the revenue per room night disappointment was due to a mix shift toward agency hotel with lower net revenue rates.” Expedia currently trades at $21.54.