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2-Star Stocks Poised to Plunge: HomeAway?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, online vacation rental marketplace HomeAway (Nasdaq: AWAY  ) has received the dreaded two-star ranking.

With that in mind, let's take a closer look at HomeAway's business and see what CAPS investors are saying about the stock right now.

HomeAway facts

Headquarters (founded) Austin, Texas (2004)
Market Cap $1.9 billion
Industry Internet information providers
Trailing-12-Month Revenue $255.3 million
Management Co-Founder/Chairman/CEO Brian Sharples
Co-Founder/Chief Strategy and Development Officer Carl Shepherd
Trailing-12-Month Return on Equity 1.8%
Cash/Debt $221.3 million / $0
Competitors Expedia
Wyndham Worldwide

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 38% of the 81 members who have rated HomeAway believe the stock will underperform the S&P 500 going forward.

Just last week, one of those Fools, All-Star iwanna10bagger, offered our community some insight into the HomeAway bear case:

I've rented two vacation rentals -- one in Hawaii, and one in Mexico. Both were nice, but both had issues. In one case, the unit had not been cleaned after the previous renter had left. In the other case, I had difficulty getting into the unit when I first arrived. These experiences highlight a problem with vacation rentals -- you're not renting from a professional service provider, but rather from a private owner, who, in most cases, lives thousands of miles away. So while I think vacation rentals can provide good value, they can also come with more headaches than hotels. Another issue with vacation rentals is that it appears that, in many cases, the owners are trying to cut costs by not employing someone local to manage their property. Based on my experiences, I'm not sure if I will rent a vacation rental again, and think that the [vacation rentals by owner] market growth is somewhat limited. [HomeAway's] market cap is pricing in a great deal of growth, which makes me think it's overvalued.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Priceline. Motley Fool newsletter services have recommended buying shares of HomeAway and Priceline. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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HomeAway CAPS Rating: ***