Darspal S Mann
Long/short equity, growth at reasonable price, special situations, deep value

AWAY: Changing Revenue Model Amid Increasing Competition, Time To Sell Or Short The Stock?

HomeAway Inc. (NASDAQ:AWAY) is transitioning to Pay Per Booking model from predominantly subscription based revenue model, which is more productive for customers but less predictable for the company. Business model moves combined with declining growth rates for subscription renewals & paid listings, upcoming seasonally weakest quarter and increased competition from high profile startups would be ominous for lofty valuations currently enjoyed by the stock.

Besides the individual issues, even traffic to the site is growing (19% in Q2) at less than the growth of global Internet traffic itself, the stock is trading at valuations that deny any of these concerns at 50 times this year's earnings or 40x EV/EBITDA. With revenue model changes to start affecting revenue and...

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