Expedia Inc(NASDAQ:EXPE) Set New Highs For 2012

Expedia Inc(NASDAQ:EXPE) made a new high  for 2012 on Friday after the company posted a much higher-than-anticipated first quarter adjusted profit and revenue.The company reported net loss of $3.3 million, or 2 cents a share, compared to a year profit of $52 million, or 37 cents a share. On an adjusted basis, the company would have earned 26 cents a share, ahead of analysts’ estimates by 9 cents.Quarterly revenue grew 12% to $816.5 million, ahead of $790.9 million expected by analysts.“Overall it looks pretty strong,” Morningstar analyst Dan Su said, noting a rise in domestic and international bookings.“You probably would expect some headwinds in the Western economies would be pressuring growth” but there was no sign of that in the Expedia report, she said.However, this morning analyst at Barclays downgraded the stock to Underweight with a $34 price target, about 19.6% below the stock’s current price. The firm said - We think the Street is overly optimistic on the potential for Expedia’s new platform to deliver continued “high-quality” growth as we believe domestic hotel transaction growth is being driven by deep discounting and at the expense of margins. Revenue per room-night was down 6% in 1Q12, and while EXPE pointed to a mix shift toward lower price rooms in Asia, we believe some of the weakness also came from continued discounting as EXPE’s gap between ADR and revenue per room night growth has risen to 6-7% over the last 3 quarters, above its 7+ year average of ~3%.

Excitement around the new 20M share buyback program and the speed of repurchases may be aggressive as (a) EXPE only has ~$1.9B in cash in the U.S. today, of which ~$1.6B does not really belong to it as it is coming from Deferred Merchant Bookings, (b) EXPE may need to hold on to some cash to be acquisitive in new geographies, and (c) it would cost EXPE ~$850M to repurchase 20M shares at current price, expensive vs. the $300M of cash EXPE actually “owns” in the U.S. today.Shares of the company are now 1.43% to $42.04. On Friday, the jumped 23.50% after reporting earnings.