Is Expedia Ready to Take Off?

Expedia, Inc. (NDAQ: EXPE) shares surged higher after nearing a 52-week low while options also exhibited increased volatility. The online travel company is set to report its third quarter earnings on October 30th and expectations are mixed. Some analysts like Smith Barney have high expectations with a price target of $29, with oil prices on the decline. However, others aren’t so sure with consumer confidence hitting an all-time low last month.

Currently, Expedia is trading with a multiple of just 11x earnings and trading below book value with low debt. The company is also growing despite the economic downturn. Last quarter, Expedia announced a 16% increase in bookings and beat analyst estimates. The company’s total bookings came in at $5.93 billion with North American bookings increasing 10% and European bookings increasing 30%. Expedia intends to keep expanding its worlwide reach as well in response to the domestic slowdown.

Call options on the stock were also heavily traded in the November ‘08 calls at the $10 and $12.50 strikes. The volatility also suggests that the price will move more substantially in the near future. Investors interested in the long-term prospects of company may also want to look at purchasing long-term options as an alternative to buying the stock outright. Currently, the $12.50 January ‘11 calls are trading at $4.50 per contract.

Expedia is an online travel company, empowering business and leisure travelers with the tools and information they need to research, plan, book and experience travel. The company created a global marketplace used by a range of leisure and corporate travelers, offline retail travel agents and travel service providers. Expedia makes available, on a package basis, travel products and services provided by airlines, lodging properties, car rental companies and others.

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