Expedia (EXPE) and Priceline (PCLN) are both online travel companies. Priceline has been the darling of the momentum trade for the first half of 2012. From a current technical perspective based on the current corrective bias of the markets Expedia is rising on higher volume while Priceline is in a corrective pattern. We may start to see a transition to Expedia as the new momentum stock as we head into the second half of the year. Both companies are locked into a battle for the European markets and European sales are both critical to Expedia and Priceline growth.
Fundamentally The companies are vastly different. Although both support a very similar PE with Priceline at 30 and Expedia at 26. Priceline is the undisputed choice for travel sites. But due to explosive website hits reported by Piper Jaffray in Expedia's European websites things are about to possibly change for Expedia's share holders. They believe that Expedia's European domains grew to 32% year over year in April compared with just 7% in March. This alone can lead to faster than normal growth expectation.
Priceline has been one of the darling momentum trades for 2012, appreciating 61% in four short months. Priceline has also been the undisputed market leader in the online travel business for years now.
Fundamentally Priceline has a 70% Gross Profit margin, which adds a great deal of free cash flow to the growing balance sheet. Current EPS is 7.39 but Priceline's EPS is expected to swell to $39.50 next fiscal year. Growth currently is at 35% but it is expected to slow next fiscal year to 24%.
Expedia is under the watchful eyes of the momentum community which consists of Hedge funds and certain institutional investors. They are watching the revenue streams, growth targets and balance sheet to see if Expedia can capture the same share appreciation as Priceline has.
Expedia has a slightly better Growth profit rate at 78% which again can add healthy free cash flow to the balance sheet. The current EPS is .72 cents but that is expected to grow to $3.29 next fiscal year. One of the areas that the momentum investors are currently watching is the growth rate of the company. Expedia has recently revamped several of its business processing models and growth is expected to move from a negative 36% to a positive 18%, far out pacing Priceline over the next 2 years.
Although the battle between Priceline and Expedia has currently been dominated by Priceline there may be a paradigm shift in the process that will propel Expedia into the momentum spotlight over the next 12 months. Both are very good positioned companies in the on site travel industry with very recognizable names. We will now watch to see if Expedia can execute its business model as well as Priceline has and become the next momentum trade.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.