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Analyst Watch: Go Long Expedia, Priceline

Wall Street stock index futures pointed to a slightly hgiher start on Thursday as investors await earnings news and U.S. weekly jobless data ahead of the all important key non-farm payrolls figures on Friday.

Here's what analysts and others are watching before the bell:

Priceline.com says it saw hotel room bookings jump 48 percent year-over-year. But what about competitors Orbitz and Expedia? Are they also seeing an uptick, and what does it mean for the group's outlook?

Mark Mahaney, Internet research director at Citigroup Investment Research, says the firm has had a buy on Priceline with a price target of $325 since August 2008 "largely because the stock has screened so well against our 4M framework (market opportunity, competitive moats, management team and business model), and we’ve found valuation generally attractive."

For a medium-dive summary of Citigroup's PCLN "long thesis," Mahaney highlights six positive factors:

  • Reasonably sustainable competitive advantages in Europe
  • A bit of a countercyclical hedge in the U.S.
  • A potentially significant Asia growth driver with Agoda
  • A pretty consistent track record of market share gains
  • One of the best management teams in the Internet sector
  • Very reasonable valuation

Meanwhile, Mahaney also has a buy rating on Expedia with a price target of $28.

The company's key positives, according to Mahaney, are:

1. Improving Revenue Margin Trend
2. Strong Advertising Revenue

The company's key negatives, he says, are:
1. Gross and OIBA Margin Decline
2. No Stock Buyback in Q2.

Mahaney has a hold on Orbitz.

See more of what analysts and money managers have to say, and get the latest financial news. Watch Squawk on the Street every weekday morning starting at 9 a.m. ET.


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