Is Expedia Likely to Outperform?

With shares of Expedia Inc. (NASDAQ:EXPE) trading at around $66.24, is EXPE an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Expedia reports earnings on Tuesday. If you’re looking for an earnings prediction, then you’re in the wrong place. This article will report the facts, and focus on the big picture. And instead of future earnings, we will look at past earnings, which have been fairly strong. Expedia has shown both EPS and revenue growth on a consistent basis. In addition to that, Expedia has grown through acquisitions. This isn’t a company that’s going to rest on its laurels. This is a company that’s always looking to improve, which is a great sign for investors.  

Expedia is now a full-scale international operation. Presently, at least 20 percent of its revenue is from overseas markets. That number will continue to increase. While Expedia is looking to spread its reach wide and far, the biggest news recently is strong growth in Asia. However, don’t get too excited. The margins and revenue in Asia are lower, and there will be increased competition from Chinese companies like International Ltd. (NASDAQ:CTRP).

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Ctrip might be a threat, but Expedia has bigger problems to worry about in the competitive arena. The following competitors, and potential competitors, make Expedia look like a gladiator with a butter knife up against a well-armed, well-shielded, and well-trained army. These competitors and potential competitors include Incorporated (NASDAQ:PCLN), Google (NASDAQ:GOOG), Facebook (NASDAQ:FB) and Microsoft Corporation (NASDAQ:MSFT).

If this was an even playing field where every company started at the sound of the same gun, Expedia would be a huge underdog. However, that’s not the case. Expedia has a substantial head start. This hasn’t fazed Priceline, but the other companies listed will have a lot of catching up to do. Potential new players of this size can also be a big plus for Expedia as it makes them a potential acquisition target. Expedia might not have an interest in being acquired, and it’s highly unlikely that it would be acquired at this price, but it is a possibility down the road. By the way, Orbitz Worldwide (NYSE:OWW) is also a competitor, but it’s clearly not as much of a threat as the above-mentioned companies.

Let’s take a look at some important numbers prior to forming an opinion on this stock…