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Why Expedia Shares Flew on Friday

By Brian D. Pacampara, CFA - Feb 7, 2014 at 12:05PM

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Is this meaningful or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of online travel company Expedia (EXPE 2.79%) soared 13% today after its quarterly results easily topped Wall Street expectations.

So what: The stock has rebounded nicely since its late-July beating on improving fundamentals, and today's fourth-quarter results -- earnings per share jumped 46% on a revenue increase of 18% -- only reinforce that turnaround optimism. In fact, Expedia's gross bookings surged 21% and the number of hotel room nights climbed 25%, giving analysts plenty of good vibes over its growth trajectory in 2014.

Now what: Wall Street doesn't expect Expedia's operating momentum to slow anytime soon. "With 3 strong transaction brands including Expedia, Hotels.com and Hotwire, and its additional exposure to Asia through ownership in eLong and a joint venture with Air Asia, Expedia should benefit from an increasing percentage of travel bookings migrating Online," noted Bank America analyst Justin Post. "We expect 8-10% growth in normal travel markets, and we see a 10-18x P/E multiple as reasonable." Of course, with the stock now up about 65% from its 52-week lows, I'd wait for some of the exuberance to fade before betting on that bullish view.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

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Stocks Mentioned

Expedia, Inc. Stock Quote
Expedia, Inc.
EXPE
$105.38 (2.79%) $2.86

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