Credit: Shutterstock photoExpedia, Inc.EXPE owned hotel search platform Trivago raised $287 million in an initial public offering (IPO). The stock debuted at $11.20 on Friday and closed up over 7.5% at $11.85.
Founded in 2005 in Duesseldorf, Germany, Trivago is one of the leading hotel search platforms in the world. The company is also known as one of the most successful start-ups in Germany.
In 2012, Expedia acquired 62% of Trivago's stake for $531 million. Since then, it has been growing significantly and has expanded to Brazil, Japan and the Middle East. In 2015, Trivago contributed 9.3% to Expedia's total revenue.
Lower-than-Expected Valuation
Despite having big names like JPMorgan JPM , Morgan Stanley and Goldman Sachs in the list of underwriters, the IPO offered 26.1 million American depository shares for $11 per share, below the anticipated price target of $13 to $15 per share.
Analysts believe that the lower IPO valuation is attributable to its timing as it comes at the end of a year, a period in which most of the technology IPOs have historically struggled. Trivago's dependence on few online travel companies is another reason for investor concern.
Moreover, Expedia has been facing tough competition both from industry peers such as Priceline PCLN and TripAdvisor TRIP , as well as individual hotel and transportation companies, which are building their own online platforms to attract direct booking. Year-to-date the stock has lost 6.15% compared with the Zacks Internet Commerce industry's gain of 6.99%.
EXPEDIA INC PE Ratio (TTM)
EXPEDIA INC PE Ratio (TTM) | EXPEDIA INC Quote
Expedia Remains a Major Stakeholder
Expedia will retain two-third of Trivago's shares that it has been holding. As of Sep 30, 2016, the company had a 63.5% stake in Trivago. The remaining one third, held by Trivago owners, has been sold through the IPO listing.
Expedia is one of the world's leading travel services companies. It provides wholesale travel to offline retail travel agents. Its main businesses and brands include Expedia.com, Hotels.com, Hotwire, Expedia Corporate Travel, Trip Advisor and Classic Custom Vacations.
Expedia's companies also operate internationally with sites in Canada, the U.K., Germany, France, Italy, Netherlands and China, through its investment in eLong.
Zacks Rank
Currently, Expedia is a Zacks Rank #3 (Hold) company. You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here .
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks - absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
EXPEDIA INC (EXPE): Free Stock Analysis Report
PRICELINE.COM (PCLN): Free Stock Analysis Report
TRIPADVISOR INC (TRIP): Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
