HomeAway Stock Price Pops On Fourth-Quarter Results

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If you need evidence of the impact a quarterly earnings report can have on a company's stock price, look no further thanHomeAway ( AWAY ).

HomeAway is the world's leading online marketplace of vacation rentals with sites representing about 720,000 paid vacation rental home listings in 168 countries.

It operates websites under its own name as well as others -- including VacationRentals.com, VRBO.com and BedandBreakfast.com -- in the U.S., Europe, South America and Australia.

HomeAway's sites link tourists with property owners around the world. The company tries to make it simple for vacation rental owners and property managers to advertise their properties and manage bookings online.

Business has been brisk enough that HomeAway has grown earnings at least 10% and sales at least 20% during each of its six quarters as a publicly traded company.

Range Bound

But its stock performance hasn't been nearly as smooth. HomeAway shares debuted at 27 in July 2011. Shares spent the next six months trending lower, then mostly hovered in the 20 to 24 range after that.

Things changed Feb. 21, when HomeAway's stock price shot up 13% to a 16-month closing high of 28.28. The surge came after HomeAway beat fourth-quarter earnings views and earned an upgrade from William Blair analyst Ralph Schackart.

It was a reversal from the last time HomeAway reported quarterly results Nov. 1.

A day later its stock price crashed 11% on a disappointing forecast. Shares fell as low as 19.58 on Dec. 10 before reversing course and trending higher.

Last week's spike gave watchers hope that HomeAway might be poised for a steadier go of it on Wall Street.

"HomeAway provides a compelling value proposition for both travelers and owners and benefits from strong network effects," JPMorgan analyst Doug Anmuth said in a Feb. 21 report. "We believe a premium valuation is warranted based on HomeAway's leadership position, strong growth and business transparency."

HomeAway charges owners yearly fees to list their properties on its sites. It offers a tiered pricing system that allows owners more options and better search rankings for additional fees.

The company competes against smaller vacation rental home outfits as well as larger online travel sites such asExpedia ( EXPE ) andPriceline.com ( PCLN ), though the latter two focus more heavily on airline, hotel and car rental bookings.

HomeAway's tiered pricing model has been a big driver of recent growth in listings revenue, analysts say.

"The acceleration of listings revenue demonstrates HomeAway's ability to increase prices through tiered pricing, retain customers through the tiered pricing transition and retain revenue through bundling and up-selling customers," William Blair's Schackart said in his report upgrading HomeAway to outperform.

Tiered pricing continues to be introduced on different products and platforms. HomeAway implemented tiered pricing on its three largest European properties during the fourth quarter.

During the third quarter, HomeAway introduced tiered pricing on VRBO.com. Customers were also recently given the option of bundling their VRBO and HomeAway listings.

"The company continues to see early benefits from newer products, including tiered pricing and bundled listings, and we continue to expect accelerating revenue growth in 2013 driven by higher ARPL (average revenue per listing)," Anmuth noted.

HomeAway reported average revenue per listing of $349 during the fourth quarter, up 8.7% from the prior year and ahead of Anmuth's estimate for $341.

Total revenue for the quarter was $71.6 million, up 22% from the prior year and in line with consensus estimates.

Listings revenue increased 23% to $62.4 million. HomeAway also gets ancillary revenue from owners and travelers as well as revenue from advertising, software and other items.

The top line got a boost from an improved market in Europe, analysts say.

"Tiered pricing on European sites is tracking ahead of previously observed U.S. adoption," Schackart noted. "On past calls, management tempered expectations on European tiered pricing adoption because of the weak economy."

Earnings Double

Pro forma EPS for the quarter doubled to 14 cents a share, topping views. HomeAway's operating margin rose 160 basis points to 10.4%, while its net margin improved 680 basis points to 6.4%.

Management guided first-quarter revenue of $78 million to $79 million, above the consensus estimate of $77.5 million. EBITDA guidance was set at $19 million to $20 million, roughly in line with consensus.

This year, the company looks to get more revenue from e-commerce offerings such as online payments and bookings.

"Our primary focus in 2013 is the continued rollout of our e-commerce capabilities and in particular, the introduction of our pay-per-booking pricing model and continued distribution of value-added services," Chief Executive Brian Sharples said in a statement.

HomeAway should also benefit from a pay-per-booking product set to launch this summer.

"(The product) should help expand HomeAway's penetration among property managers and owners who rent for fewer weeks in the year, with limited cannibalization of existing owners," analyst Anmuth said.

Analysts polled by Thomson Reuters expect HomeAway to report earnings growth of 33% this year and 23% in 2014.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: AWAY , EXPE , PCLN

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