I can't be the only one who has to hold in a chuckle when analysts downgrade stocks long after they have been beaten down.

Merrill Lynch is downgrading Expedia (NASDAQ:EXPE) to neutral this morning, even though shares of the popular travel portal are already 63% below their 52-week high. Unfortunately, the diss is warranted given the industry's cutthroat ways.

Orbitz Worldwide (NYSE:OWW) announced a new promotion yesterday, eliminating booking fees on most flights through the end of next month. Stack that on top of the Price Assurance plan that Orbitz rolled out last summer, according to which it rebates the difference if someone subsequently books the same Orbitz flight at a lower price, and it's easy to see that travel sites are forsaking margins in the pursuit of market share.

Analysts see earnings declining at Expedia this year, recovering only a chunk of the dip in 2010. Orbitz isn't as lucky. Wall Street sees the company posting annual losses both this year and next.

Priceline.com (NASDAQ:PCLN) is bucking the trend. Analysts see profits inching higher this year, as the portal's deal-driven "name your own price" positioning isn't a direct competitor to the conventional travel sites.

This doesn't mean that offering bargains is enough. Deal publisher Travelzoo (NASDAQ:TZOO) posted a 2% year-over-year dip in North American revenue during the fourth quarter. Yahoo! (NASDAQ:YHOO) shut down its FareChase comparison travel shopping site last month.

Will Expedia fly again?
Shares of Expedia opened nearly 5% lower on this morning's downgrade, after heading 7% lower yesterday. With Expedia's stock now in the single digits, it's only a matter of time before the ridiculous Google (NASDAQ:GOOG) buyout rumors resurface.

A deal still doesn't make sense for Google, a company that is better off as an unbiased sponsorship outlet for all travel sites. However, Expedia certainly is starting to look cheap. It is now trading for less than 10 times this year's depressed profit estimates.

The next few quarters won't be pretty, but if it can hold its breath longer than Orbitz -- and it should -- the long-term prospects for Expedia are better than this morning's downgrade would have one believe.

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Longtime Fool contributor Rick Munarriz has been booking travel online since the 1990s, but he does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.