Expedia Downgraded on Price War Fears

J.P. Morgan analyst Imran Khan Thursday morning chopped his rating on Expedia (EXPE) to Neutral from Overweight, siting expectations that online travel industry will see “increased competition and pricing wars.” He trimmed his price target on the stock to $9, from $12; he also reduced estimates on the company.

For 2009, he goes to 70 cents, from 82 cents; for 2010, he now sees 90 cents, down from $1.05.

Khan said he believes a recent decision to waive air booking fees will not result in significant market share gains. “Unlike when Priceline (PCLN) cut its booking fees and made massive market share gains, no-booking fee air tickets have become somewhat the industry norm today,” he writes. “In addition to air suppliers and Priceline, a recent WSJ article suggests that Travelocity might follow suit.” He says that over 90% of airline tickets booked on the Web will now be offered on a no-fee basis.

Khan estimates that dropping the fees will cost the company $90 million in ‘09 revenues. Meanwhile, he contends that despite significant investment, the company is not seeing any market share gains in Europe.

EXPE Thursday is down 56 cents, or 6.9%, to $7.60.

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