Nearly every aspect of Expedia's results show that the company is flying high, right along with rival priceline.com
Greater transaction volume and rising airline and hotel prices fueled Expedia's large jump in bookings. While we did see fuel costs eat into the bottom lines of Alaska Air
Hotel revenue, which accounted for 65% of Expedia's total revenue, flew higher by 27%. Even advertising and media revenue leapt by 27%, thanks in part to a 34% jump in revenue from its third-party cost-per-click service TripAdvisor. The one and only sour point of Expedia's quarterly results is the 1% decline in air revenue derived from a 3% drop in airline ticket sales. Luckily for shareholders, airline revenue only accounts for 10% of total revenue.
These results therefore beg the question: Which online travel site is the best buy?
Where you invest matters
I'm going to have to say Expedia! Orbitz
Priceline does edge out Expedia on many expectations of future growth. It boasts a higher trailing profit and operating margin, more net cash, and a significantly higher five-year growth projection.
But relative to Priceline trading at nearly 15 times book and 20 times forward earnings, Expedia looks like a steal at 3 times book and under 14 times forward earnings. You are still getting a double-digit growth rate by investing in Expedia, and given this quarter's 60% jump in free cash flow, it's a growth machine perfectly capable of paying out a future dividend. This also doesn't take into account the effect Groupon could have on Expedia's future growth if it continues its partnership with the social coupon giant.
Given the green light
If yesterday's earnings were any indication of where Expedia is headed, I think shareholders can breathe a sigh of relief. Rising travel costs aren't impeding growth in this sector, and Expedia looks like investors have given it the green light to trade higher.
Which online travel site would you rather own: Expedia, Priceline, or something totally different? Share your thoughts in the comments section below and consider adding Expedia to your watchlist to keep up on the latest news in the online travel sector.