Expe

Security Valuation

Rodrigo Costa

Joaquin Leal

Fabio Rabinovich

Alberto Sarfaty

11 December 2012

Expedia (EXPE)

Assuming coverage with a Buy rating and a $71.96 price target; well positioned to continue to command the Online Travel Agency (OTA) space.

Key Takeaway

We are initiating coverage of Expedia with a Buy rating and $71.96 price target. At current levels, the stock looks underpriced which currently trades at $61.86.

Global platform and offerings puts the company at a competitive advantage. Expedia operates under several different brands, offering a variety of services that allows the company to target a broad set of traveler demographics. Expedia has over 50 million+ monthly unique visitors to its websites worldwide. Expedia provides its customers with access to approximately 150k hotels, in over 200 countries, 300+ airlines and 2.6 million packages.

International Growth. There is a secular shift occurring in both Asia and Latin America from offline to online booking of trips. The opportunity amounts to approximately $290 in Asia Pacific and $70 billion in Latin America. These geographies still have a low penetration for online travel – approximately 21% in Latin America, 24% in Asia-Pacific vs. 58% in the U.S. These international customers are becoming more and more accustomed to the adoption of online bookings and payments. Furthermore, the Fragmented nature of the hotel market overseas makes room for Expedia to grow bookings and revenues in this promising product category.

Opportunity for new Channels of Distribution. While the vast majority of bookings are still done through notebooks and desktops new technological innovations and developments are creating new opportunities such as travel bookings made through mobile devices. Expedia has made several investments in this space and this presents an opportunity for future growth.

Size and scale of operations. Expedia’s size and scale...