Investment firm Goldman Sachs, citing a favorable airline and lodging
industry environment, said today it is raising its performance estimates for
online travel companies Expedia and Travelocity.
GS said it is maintaining its positive outlook on Norwalk, Conn.-based
Priceline (estimates for the name-your-own-price e-commerce company were
raised on June 6 and GS gave it a market outperform rating on May 1.)
Analysts said factors affecting the online travel business include increased
availability of inventory to online travel companies as a result of declining
aggregate business demand;
stable demand from consumers seeking value leisure fares; and limited price
discounting in airline direct purchases.
GS said in an advisory to clients: “We are increasing Expedia’s EPS to 14 cents from 8 cents, increasing Travelocity’s
EPS 6 cents from 4 cents and maintaining Priceline’s
3 cent EPS estimate which we previously year to date given
earnings visibility.”
For Expedia, GS raised second quarter estimates to $138 million in revenue,
up from $127.4 million. For Travelocity, GS raised second quarter estimates
to $82 million in revenue, up from $79.4 million. GS earlier raised its
estimate of Priceline’s second quarter revenues to $315 million from $305
million.
Expedia shares closed yesterday at $41.05; Traveocity closed at $29.95 and
Priceline closed at $7.44.
“We believe these companies are benefiting from the unique conditions for
airlines and hotels as the steep decline in business travel demand is
resulting in greater supply for the online travel companies which, combined
with continued solid leisure demand from consumers, should result in strong
revenues,” GS said.
But what about Orbitz, the new travel site backed by five major airlines? GS
said that “while we do not think June results will be impacted by the Orbitz
launch on June 4 or slower consumer demand, which we have not seen yet, we
continue to be watchful of the impact of both of these potential overhangs.”
Just yesterday a report from Boston-based competitive intelligence service Compete Inc.
said that Orbitz has done a nice job of attracting lookers in its first week
or so of operations, but must convert more of the curious into paying
customers.
Clearly a rising tide may help all the online travel sites, including Orbitz.
“We believe that the airlines and hotels are now increasingly dependent on
the online distribution channel and that as a result, the online travel
companies benefit from better supply,” GS told clients. “The fact that the
airline industry in aggregate continues to face financial difficulties this
quarter will lead, we believe, to their increased dependence on distribution
through third parties in the near-term”
