Cramer: Time to Sell Expedia
Although Expedia’s stock has gained roughly 65 percent year-to-date, “Mad Money” host Jim Cramer noted that two analysts can’t agree on its prospects.
“We love these analyst face-offs here on “Mad Money” because they give you a sense of the best arguments both for and against a stock,” Cramer said. “When analysts fight, you get a chance to sort through the bull case and the bear case and then to figure out which of the two is stronger.”
An analyst at Piper Jaffray downgraded Expedia's stock from ‘buy’ to ‘neutral’ on Tuesday. The firm also cut its price target from $53 a share to $50 a share and stopped just short of calling it a ‘sell,’ Cramer said. On Wednesday, Stifel Nicolaus used the weakness created by Piper’s downgrade to reiterate its ‘buy’ rating. Stifel Nicolaus also raised its price target to $60 a share.
In Cramer’s opinion, Piper Jaffray downgraded the stock so that investors would sell into strength. Expedia’s stock had gained so much that Piper thought the risk/reward ratio was less favorable. So they downgraded the stock and cut the price target, he said.
Stifel has stuck to its guns regarding its upgrade, though, Cramer said. The firm thinks the stock has room to run, as recent technology upgrades that Expedia has made haven't quite affected the share price yet.
But Cramer said Piper’s downgrade also had to do with Europe. The firm seemed spooked about the region, especially considering its ongoing debt crisis. Given how much Expedia’s stock has already run, Cramer thinks they were right to be cautious.
“You don’t double down on an online travel site when the global economy seems to be slowing,” Cramer said. “At least for right now, I would ring the register on Expedia. That's right, the stock is in the ‘Sell Block’ pending a large pullback.”
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