>Pair Trade: Long Expedia, Short Priceline

April 28, 2010

>A New York presenter recommended a pair trade on Expedia (NASDAQ: EXPE, $23.68) and Priceline (NASDAQ: PCLN, $264.30). EXPE has been exceeding expectations in the recent quarters, but the stock performance hasn’t been nearly as good as PCLN’s. Priceline remains the #1 player in Europe, but Expedia is gaining on the continent with its substantially increased hotel inventory. EXPE is also able to offer air and hotel packages to European consumers, who prefer to order packaged accomodations, something Priceline is not providing. Expedia’s TripAdvisor portal is the only real advertising revenue generator in the space, with growth in this business accelerating recently for EXPE. Trading at 8x EV/EBITDA versus 17x for Priceline, Expedia is strongly undervalued in the presenter’s view, while PCLN may be topping here.

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