Expedia Inc (EXPE) Below $10?

The stock market is in free-fall right now - but there are a lot of bargain stocks that look too good to pass up. Expedia, Inc.  (Public, NASDAQ:EXPE) is one that caught my eye.

Think about it like this, if you saw Scarlett Johansen bloody and beaten on the side of the road, you’d still want to take her home and nurse her back to health, because after the blood is washed and the wounds are healed, she’s going to be drop-dead hot like she always was.

Expedia is trading at just 7.94 time 2008 earnings and 6.5 times 2009 earnings. The travel industry is literally beaten and bloody, laying in a gutter, and choking on its own vomit right now. In spite of that, like my analogy above, it’s not going to be that way forever.

When it comes to online travel, it comes down to both Expedia and Priceline. This period of uncertainty in the travel industry should result in some consolidation of the online players. There are thousands of online travel sites out there - many of which will not be able to stay afloat in the midst of the credit crunch and the downtrend in the economy. Less competion should benefit Expedia in the long run.

Expedia is almost twice as big as its closest competitor, with nearly 35% of the U.S. online travel agency, market. The company uses its size to negotiate lower wholesale prices from suppliers, and, because Expedia is the largest OTA, more suppliers are likely to distribute through the firm. The lower costs lead to higher margins than competitors, and the diverse inventory attracts even more customers to Expedia's sites, leading to favorable network economics and an uphill battle for competitors.

I‘d also argue that lower energy prices should benefit Expedia and the travel industry as a whole in the coming months. I don’t know about you, but I filled up my tank the other night and it was ½ the cost to fill-up as it was 6 months ago.

So go book a vacation, you workaholics! There may not be a cheaper time to travel than this winter as a sharp drop in demand forces airlines, hotels and cruise companies to slash fares, cut rates and lower fees. An off-peak, round-trip ticket from Los Angeles International Airport to Honolulu on Delta Air Lines was selling for $244 last week, the lowest I’ve seen it.

Enjoy it while it lasts – travel rates, along with Expedia’s share price, aren’t going to stay this low forever.

EXPE 1 Year Chart:

Disclaimer: The author owns no positions in the companies mentioned in this article