Monday, February 14, 2011

Expedia, Inc. (NASDAQ:EXPE) Q1 2011 Analysis

Recent price: 21.31$
P/E Ratio: 13.67
3 months Target Price: 28$

Company Description
For those who have not already heard about the company, Expedia, Inc., a former subsidiary of Microsoft, is one of the world's leading online travel companies with the mission of becoming the largest and most profitable seller of travel in the world, by helping everyone everywhere plan and purchase everything in travel. Expedia's brands and businesses work together to share best practices and leverage geographic reach, scalable business models, and customer-related synergies.

Confidence Margins
Strong resistance $29.85 (+40%)
Light resistance $27.91 (+31%)
Light support $20.99 (-2%)
Strong support $18.30 (-14%)

This company is part of the flock of companies that showed recent quarterly results that were under what analysts were expecting. Another interesting fact is that Expedia has been in a feud with one of it's airline service providers. The combined effect of those events significantly drove dove down the price of the stock, which provides investors with a great buying opportunity.

Entry strategy
For the cautious investor:
The best thing to do here is suggested to initiatiate a long position. The stock should be acquired while it is still under 21.50$.

For the risk-taking trader:
The April 2011 22$ call option contract seems to be the right position to take, they can be acquired for 95$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 28$, or keep it until 29$ if the stock crosses the light resistance level.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 28, as for the cautious investor. This price level should provide a satisfying performance.

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