Expedia thinks it’s buying low

Jeff Tyler Jun 19, 2007

Expedia thinks it’s buying low

Jeff Tyler Jun 19, 2007


Kai Ryssdal: The online travel service Expedia is the latest company to go on a buying spree. Buying itself, really. Today, Expedia announced plans to spend about $3.5 billion on its own stock. Almost half of all its outstanding shares, in fact.

Marketplace’s Jeff Tyler went looking for some sign of what the news might say about Expedia — and about the Internet travel industry overall.

Jeff Tyler: As the leading online travel agent, Expedia generates lots of cash. But it’s struggling to generate lots of new clients.

Analysts say the company’s growth is flattening out. That’s one of the reasons Expedia’s buying its own stock — according to analyst Henry Harteveldt with Forrester Research — to boost the share price.

Henry Harteveldt: If Expedia were able to grow its business more from the traveling public, its stock price I think would reflect that.

Ironically, it’s the strength of the travel industry that creates a challenge for the online travel agents.

Morningstar equity analyst Sumit Desai explains:

Sumit Desai: Over the past two years, travel trends have been pretty strong. And that has shifted the negotiating power in favor of some of the airlines and hotels, and going against the companies like Expedia and other online travel agents.

Despite the challenges facing the industry, one of Expedia’s competitors thinks the climate is perfect for a trip to Wall Street. Online travel agent Obitz recently announced that it will go public. So, Expedia will be competing with it not just for customers,but for investors too.

Again, Forrester Research analyst Henry Harteveldt:

Harteveldt: Orbitz will be in the public markets, and I think that Expedia wants to make sure that its stock price not only reflects the value of the company, but potentially has a premium.

Expedia is willing to pay for that premium. The company plans to buy about 116 million shares at up to 30 bucks per pop. That’s about 18 percent more than Expedia shares sold for yesterday.

I’m Jeff Tyler for Marketplace.

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