Why HomeAway Inc. Shares Might Continue to Pull Back

Does this analyst make a good case? Or is it just more noise from Wall Street?

May 29, 2014 at 11:33AM

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of HomeAway (NASDAQ:AWAY) slumped about 2% today after J.P. Morgan downgraded the online vacation rental marketplace from overweight to neutral.

So what: Along with the downgrade, analyst Doug Anmuth lowered his price target to $38 (from $49), representing about 22% worth of upside to yesterday's close. So while contrarian traders might be attracted to HomeAway's sharp pullback in recent months, Anmuth's call could reflect a sense on Wall Street that the company's current marketing costs are just too high to trigger a near-term rebound.

Now what: According to J.P. Morgan, HomeAway's risk/reward trade-off is pretty balanced at this point. "We believe increasing marketing spend is appropriate to grow the PPB business and we are also encouraged by healthy renewal rates and strong subscription pricing growth," said Anmuth, "but we believe visibility will be limited in the near-term and return on marketing spend could take some time." With HomeAway shares now off about 40% from their 52-week high, however, those short-term concerns might provide patient Fools with a juicy long-term growth opportunity. 

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

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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