Sector Wrap: Online Travel Trades Higher
06.12.2006, 17:34
Shares of online travel companies traded higher Friday, as Expedia Inc. announced a stock buyback and investors digested a merger among Sabre Holdings Corp.'s competitors.
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Shares of Expedia gained $1.84, or 9.9 percent, to close at $20.46 on the Nasdaq. The company announced a plan to buy back $30 million in shares, or about 9.8 percent of its outstanding stock.
Bellevue, Wash.-based Sabre Holdings Corp. gained 23 cents to close at $28.32 on the New York Stock Exchange. Shares hit a new 52-week high of $28.39 earlier in the session.
Sabre operates Travelocity.com, an online travel agency, as well as an electronic travel distribution system that connects travel agents and other travel buyers with airline, hotel, car and other travel inventory.
On Thursday, two competitors in this arena, Travelport Ltd. and Worldspan LP, announced an agreement to merge operations.
"We think that Sabre may continue to gain market share from Worldspan in the near-term," wrote Morgan Stanley analyst Christopher Gutek in a note to investors Thursday.
However, the analyst noted that if the combined companies manage to pare down some of their redundant technology, "it may put Sabre at a cost disadvantage."
Gutek added that "further consolidation in this industry is possible, with the remaining three global delivery systems potentially heading towards two, although we don't think another deal is likely near-term."
Thomas Weisel analyst Jake Fuller wrote in a research note Thursday that the combination will ultimately prove negative for Sabre.
Acquiring Worldspan makes Travelport the leader in U.S. market share, Fuller wrote. Cost savings following the acquisition may give Travelport room to offer its clients more incentives than Sabre. The deal may also push Sabre to consider teaming up with Amadeus, another global delivery system.
Shares of priceline.com Inc. also improved, adding 63 cents to close at $40.80 on the Nasdaq. The stock has gained for three straight days, following a downturn Tuesday when investors learned a major shareholder sold off a stake in the company.