Orbitz: Five Firms Launch Coverage of the Disappointing IPO

Five Street analysts on Wednesday launched coverage of online travel services provider Orbitz (OWW), and as is usually the case in the post-IPO mass launch phase, most of the commentary was positive. What has not been so positive has been the stock’s post-IPO performance: the shares came public last month at $15, and Tuesday night closed at $12.04, a decline of almost 20%. OWW? Oww!

Here’s a rundown on this morning’s batch of reports on the company:

• Imran Khan, J.P. Morgan: The lone skeptic in the batch, he started the stock with a Neutral rating. “While we are encouraged by top-line growth prospects and likely margin expansion, we think that at the current share price risk/reward is roughly equal,” he wrote. He sees EPS of 72 cents this year, 84 cents next year.
• Jake Fuller, Thomas Weisel Partners: Fuller starts the stock with an Overweight rating and $18 price target. He cites three “key themes” for the stock: favorable industry backdrop; potential to deliver above market EBITDA growth; shares trade at a significant discount. “Investors doubt OWW’s ability to deliver against Street expectations, but we see concerns as overdone and view the current valuation as an appealing entry point for patient investors,” he writes. He says the stock trades at a discount on a P/2008 EBITDA basis of 21% to Expedia (EXPE) and 36% to Priceline (PCLN).
• Aaron Kessler, Piper Jaffray: Kessler launches coverage with an Outperform rating and $16 target. Kessler notes that the company’s biggest growth opportunities are its non-airline and international segments; he notes that non-air was just 25% of gross bookings in the second quarter, versus 60% for the average online travel site. International was just 13% of bookings and 19% of revenue in the latest quarter. He also says “scale efficiencies” and a move to a global technology platform “should drive strong operating leverage.”
• Steve Weinstein, Pacific Crest: He starts with an Outperform rating and $18 target. Weinstein asserts that Orbitz “is poised to leverage its platform into stronger international and non-air bookings over the next three years.” (Essentially the same thing Kessler said.)
• George Askew, Stifel Nicolaus: Askew launched with a Buy rating and $16 target, asserting the stock is “too cheap to ignore.” He notes that on an EV/EBITDA basis, the stock is trading at a discount of over 20% to other online travel stocks. And he repeated the usual line about growth opportunities being in international and non-air, though he sees some additional potential drivers, including a move into corporate travel, cost reductions via a new IT platform and strategic global acquisitions.

Orbitz on Wednesday was up 40 cents at $12.44.