NEW DIRECTIONAL CALL PLAYS
Expedia Inc. - EXPE - close: 74.55 change: -0.54
Stop Loss: 71.45
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see below
Why We Like It:
EXPE is in the services sector. The company is in the super competitive online travel industry with rivals like Priceline.com (PCLN) and Orbitz Worldwide (OWW).
EXPE is developing a trend of beating analysts' estimates with strong profit and revenue growth. This past quarter EXPE reported revenues of $1.2 billion. That is the fifth quarter in a row that EXPE has delivered double-digit year over year revenue growth. The company has also seen surging growth in its bookings. Q3 2014 saw 15% bookings growth. Q4 2014 was +21%. Q1 2014 was +29%.
Analyst firm Cantor Fitzgerald recently offered bullish comments on EXPE and raised their price target. The company is having success with its Expedia Traveler Preference program. In Q3 2013 there were about 35,000 hotels in the program. By Q1 2014 that has grown to 51,000 hotels. As more hotels join it will boost EXPE's room nights metric and sales.
Billionaire hedge fund manager David Tepper's Appaloosa Management is also bullish on EXPE. The latest 13F filing showed that Appaloosa had initiated a new stake in EXPE in the first quarter of 2014.
Bears could argue that EXPE, PCLN and OWW could face competition from companies like Google and Facebook as they seek to boost their ad revenues to their large audiences. Reuters has reported that Google is experimenting with some programs with a few hotels. This threat is probably a few years away and could eventually make EXPE as potential takeover target.
Technically EXPE experienced a correction from $81 to $67 earlier this year. The stock found support in the $67 area and just recently EXPE has broken out past some key resistance.
At the moment shares of EXPE are flirting with a breakout past potential round-number resistance at the $75.00 mark. Today's high was $75.32. I am suggesting a trigger to buy calls at $75.75 with a stop loss at $71.45, just under the simple 50-dma.
The Point & Figure chart is bullish and forecasting at $90.00 target. I do expect the $80.00 area to offer some overhead resistance.
We will choose a target later as the play progresses.
Trigger @ $75.75
- Suggested Positions -
Buy the Oct $80 call (EXPE141018C80) current ask $4.10
Option Format: symbol-year-month-day-call-strike
Entry on June -- at $---.--
Average Daily Volume = 1.6 million
Listed on June 09, 2014