Amid a surge in online travel stocks during the past week, two analysts discussed whether Priceline.com or Expediais the better buy.
In an interview with CNBC’s “Squawk on the Street,” Mark Mahaney, a U.S. Internet analyst at Citigroup, called Priceline one of his “top buys” and said he sees the company’s shares climbing to $850.
“Priceline’s got four differentiating features to it,” he said. “They’re more international focused than Expedia . They’re more hotel focused, which is where the best economics are. They’ve got the lowest cost structure in the industry, and they go to the market with the lowest prices.”
Although Priceline has considerable exposure to Europe, with about 50 to 60 percent of its bookings coming out of the region, Mahaney is still bullish on the stock. Big currency and macro moves do affect the company’s shares, he said, but Europeans tend to think of travel as more of a fixed expense than as a discretionary expenditure.
Mahaney has a “neutral” rating and a $44 price target on Expedia.
Meanwhile, Jake Fuller, a travel and lodging analyst at Lazard Capital Markets, said he favored Expedia over Priceline right now. He has a $45 price target and a “buy” rating on Expedia.
“I think both of these companies are very well positioned,” Fuller said. “In the short term, I’d focus on Expedia. It trades at 12 times earnings. It’s turning business around. It’s showing top-line growth. They are still the global leader in online travel.”
Fuller added that Expedia’s earnings reportanswered many of the marketplace’s doubts, as it showed top-line growth, margin expansion, and stock buybacks.
As market share consolidates between Expedia and Priceline, Fuller said there is no hope for Orbitz Worldwide, which is losing market share, according to Lazard’s data.
“I think what’s happening on a global basis here is market share’s consolidating with Expedia and Priceline,” he said. “It’s increasingly hard for the smaller regionally focused companies to compete. They’re heavily weighted to the U.S. and the airline ticket category. Those are tough businesses right now, and I see them losing share. ”
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Lazard Capital Markets makes a market in Expedia, HomeAway, MakeMyTrip, Orbitz Worldwide, Priceline, and TripAdvisor securities. Mahaney's firm has an investment banking conflict with Priceline.
Follow Katie Little on Twitter @katie_little.