priceline.com Incorporated (NASDAQ:PCLN) and Expedia (NASDAQ:EXPE) are both online travel companies. Priceline has been the darling of the momentum trade for early 2012. From a current technical perspective, based on the current corrective biased of the markets, Expedia is rising on higher volume, while Priceline is in a corrective pattern.
Even though Priceline is on many conviction buy lists at many brokerages, Expedia is starting to gain momentum. We may start to see Expedia as a momentum trade as we head into the second half of the year. Both companies are locked into a battle of the European markets and European sales are critical to both Priceline's and Expedia's 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. Priceline executes its business model with ease and conviction. While Expedia has had problems finding its footing. 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 to 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 its growing balance sheet. Current EPS is 7.39, and Priceline is expected to swell to $39.50 next fiscal year. Growth is currently at 35%, but it is expected to slow next fiscal year to 24%.
Expedia is under the watchful eyes of the momentum and brokerage 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 75%, 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 outpacing Priceline over the next 2 years.
Although the battle between Priceline and Expedia has currently been dominated by Priceline, Priceline needs to watch its rear view mirror carefully because Expedia is gaining footing in the online travel business. There maybe a paradigm shift going on in the online travel business that will propel Expedia into the momentum spot light over the next 12 months. Both are very well positioned companies in the onsite 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. Priceline needs to recognize the competition threat and have a healthy degree of paranoia with regards to Expedia being a worthy market leader.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.