Expedia's stock was upgraded, while Priceline Group's was downgraded by a financial analyst on Monday, reflecting differences in the two OTAs' growth strategies.
Deutsche Bank analyst Lloyd Walmsley upgraded Expedia to "buy" and said the stock price could almost double within the next five years as the company continues to snap up smaller OTAs and reduce operational costs as those companies are consolidated. Expedia acquired Australia-based OTA Wotif late last year, bought out Travelocity in January and has a pending agreement to buy Orbitz Worldwide.
"We think core room nights and bookings metrics can remain strong over the intermediate term as the company continues to ramp up its international hotel supply and performance-driven monetization engine, coupled with meaningful synergy potential from its acquisition of Travelocity, pending acquisition of Orbitz and potential for further consolidation," Walmsley wrote.
Meanwhile, Walmsley downgraded Priceline to "hold," noting that the OTA has larger exposure to the vacation-rental market impacted by the rapid growth of Airbnb than Expedia does. Priceline's Booking.com includes vacation-rental listings, while the company's Kayak metasearch division said earlier this month that it'd add listings by vacation-rental service HomeAway.
"The path forward in vacation rentals will be more challenging as (1) the company expands from what appears to be predominantly professionally managed resort properties into by-owner inventory where it is not as well-positioned, and (2) Airbnb moves more aggressively into its inventory strongholds, boutique hotels and BNBs in Europe and professionally managed vacation rentals," Walmsley wrote.
Expedia shares rose almost 1% on Monday and are up about 28% since the beginning of the year. Priceline shares fell almost 1% on Monday, though shares are up about 1% since the beginning of the year.