Orbitz Worldwide, Inc. (NYSE:OWW) Downgraded By Goldman Sachs
Orbitz Worldwide, Inc. (NYSE:OWW) share holders got a rude shock yesterday when banking conglomerate and trading house Goldman Sachs downgraded the stock of the online travel portal to a sell from previous recommendation of neutral. The analysts at the financial house have also reduced the P.T to $8, which was well below the prevailing trading price.
Market Dynamics In Play
The Goldman Sachs analyst has pointed out that the firm’s growth is slowing down as its traditional revenue streams are coming under increasing pressure on the back of changes in the market dynamics. Prominent among these market changes are its efforts to strike a “private label” agreement with credit card issuer American Express, which is likely to lead to a dip in revenue in the near term and the likelihood of loosing users when its one on one relationship with Priceline Kayak ends later this quarter. It also has taken into consideration the relatively higher valuations the stock is commanding now days, in comparison to its peers who are of a similar size and market presence.
Risks Spectre Increases
Another risk being anticipated for the online travel agency is the move by its better placed competitors move to leverage mobile commerce and significant use of metasearch based targeting of most likely customers to gain market share at the cost of Orbitz Worldwide, Inc. (NYSE:OWW) market share. The report goes on to caution investors that, “With (Orbitz) stock trading at a premium to the group on a growth relative basis, we believe Orbitz has an incrementally higher-risk profile due to slowing growth.”
Market Sell Off Occurred
The other factors which have led to the downgrade are the weak expectations that the company has set for its 2014 operations, in addition to the slippery fundamentals. On the back of the downgrade, investors moved out of the stock during trading on 19th March.