Why HomeAway Inc. Shares Might Continue to Pull Back

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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  • Report this Comment On June 09, 2014, at 10:26 AM, tunetopper wrote:

    If Motley fool rec's AWAY then why do they allow such a meaningless article to be published?

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Brian Pacampara

I take a look at big 10% moves, as well as stock-shaking analyst calls, on a daily basis for The Fool. While I don't believe in active trading, closely monitoring Mr. Market's mood swings can help identify long-term opportunities.

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9/4/2015 3:59 PM
AWAY $27.68 Down -0.83 -2.91%
HomeAway CAPS Rating: ***