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Orbitz Worldwide Inc. (NYSE:OWW)

Orbitz Worldwide Inc. (OWW) is a global online travel company that uses technology to enable leisure and business travelers to search for and book a range of travel products. The Company’s brand portfolio includes Orbitz (www.orbitz.com); CheapTickets (www.cheaptickets.com); the Away Network (www.away.com); Orbitz for Business (www.orbitzforbusiness.com) in the Americas; ebookers (www.ebookers.com) in Europe, and HotelClub (www.hotelclub.com); and RatesToGo (www.ratestogo.com), based in Sydney, Australia, which has operations globally.

The Company provides customers with the ability to book a set of travel products, from more than 85,000 suppliers worldwide, including air travel, hotels, vacation packages, car rentals, cruises, travel insurance and destination services, such as ground transportation, event tickets and tours. OWW also licenses its technology and business services to third-party partners and offers them access to its travel content through its white-label business, as well as hosts and manages Web sites on behalf of third-party partners.

The Company was founded in 2000 and is headquartered in Chicago, Illinois. OWW has approximately 1,500 full-time employees, more than half of whom are based in the U.S.; the remaining are based primarily in Australia and the UK.

Share Statistics Sep-22-09			2007	2008	%Chg	Q2 2008	Q2 2009	% Chg
Symbol	OWW	Revenue, Mn	859.0	870.0	1.3%	231.0	188.0	-18.6%
Current price	$6.18	Gross margin	81.7%	81.3%	-40 b.p.	80.1%	81.9%	80 b.p.
52wk Range:	$1.10-$7.73	Oper. Margin	4.9%	-27.4%	n/m	6.5%	12.8%	630 b.p.
Avg Vol (3m):	482,698	Net margin	-9.9%	-34.4%	n/m	-2.2%	5.3%	n/m
Market Cap.	$520.7M
Dil. Shares Outst.	83.71M	EPS, $	-1.03	-3.59	n/m	-0.06	0.12	n/m

Source: Reuters.com, SEC Filings.

Financial Summary

Net revenue was $188 million for the second quarter of 2009, down 19% (15% on a constant currency basis) from the second quarter of last year. The revenue decline was primarily due to the removal of most air booking fees on the Company’s domestic sites and a decline in average hotel room rates globally. Adjusted EBITDA increased 23% to $45 million for the second quarter of 2009 as compared with the second quarter of 2008. Adjusted EBITDA margin increased to 24% for the second quarter of 2009 from 16% for the same quarter last year. OWW reported net income of $10 million or $0.12 per diluted share for the second quarter of 2009, compared with a net loss of $5 million or ($0.06) per diluted share for the same period last year.

At June 30, 2009, cash and cash equivalents were $131 million, including cash from borrowings under the revolving credit facility, compared with $99 million of cash and cash equivalents and no outstanding borrowings at June 30, 2008. At the end of the quarter, there were $65 million of outstanding letters of credit issued by Travelport. As of June 30, 2009, OWW had a working capital deficit of $229 million as compared with a deficit of $258 million as of December 31, 2008.

	# of Estimates	Mean	High	Low	1 Year Ago
SALES (in millions)
Quarter Ending Sep-09	11	203.18	232.61	175.20	250.45
Quarter Ending Dec-09	11	165.99	179.90	146.40	231.45
Year Ending Dec-09	12	747.37	809.00	697.60	968.06
Year Ending Dec-10	12	791.97	851.90	690.20	1,026.76
Earnings (per share)
Quarter Ending Sep-09	12	0.11	0.30	-0.04	0.20
Quarter Ending Dec-09	11	0.01	0.20	-0.10	0.17
Year Ending Dec-09	7	-3.75	-3.47	-3.94	0.53
Year Ending Dec-10	8	0.19	0.35	0.06	0.54
LT Growth Rate (%)	3	10.67	12.00	10.00	16.20

Source: Yahoo! Finance, SEC Filings.

Since the end of July, OWW stock price soared 150% t0 $6.50 after the Company reported second-quarter sales that were in line with estimates and a profit per share when a loss had been expected. In addition, the jump of its share was influenced by the recovering economy and the increasing interest in online traveling services. Over the last 52 weeks the stock has ranged from a low of $1.10 to a high of $7.73.

Analyst Consensus

Fifteen analysts polled by Thomson Reuters consider the “Hold” strategy for OWW.

Analyst Detail	Buy	Outperform	Hold	Underperform	Sell	No Opinion
Latest	3	1	11	0	0	0
4 weeks ago	3	1	11	0	0	0
2 months ago	2	1	10	2	0	0
3 months ago	2	2	9	2	0	0
Last year	3	3	9	0	1	0

Source : http://markets.ft.com/tearsheets/analysis.asp?s=OWW%3ANYQ

Investment Highlights

In April of this year, OWW cut its flight booking fees as a response to competitive pressures from traditional airline sites. The impact was immediate and beneficial for the Company. Thus, standalone air transactions were up dramatically. Specifically, although gross bookings were down 12% year-over-year on OWW’s U.S. sites, the year-on-year air ticket growth in the second quarter of this year increased by 22 percentage points, as compared with the year-on-year growth rate in the first quarter. OWW’s dynamic packaging product continued to post strong volume growth, with domestic dynamic packaging transactions up 26% compared to the same period last year. In Europe, the Company’s e-bookers dynamic packaging business also posted strong unit growth. While these volume increases have helped offset the impact of unit revenue decline from booking fee cuts, revenue was still down year-over-year, primarily down to the removal of flight booking fees, sharply lower hotel ADRs and a reduction in hotel booking fees.

The Company has articulated hotel as being the play for 2009 and beyond, and has prioritized its entire technology plan accordingly. OWW took some significant initial steps toward improving its hotel offering during the quarter by drastically cutting booking fees on hotels around the world and by launching two industry-leading innovations: Total Price hotel search results and Orbitz Hotel Price Assurance. Thus, OWW is now the only major online travel company to show base rate, taxes and fees, and total price per night upfront on the initial search results page. The Hotel Price Assurance represents an innovation that automatically refunds customers when lower hotel rates are booked on orbitz.com. The Company continues to explore new hotel connectivity opportunities and to make investments in its hotel infrastructure and in the hotel content available on the Web sites, such as editorial descriptions, photographs and user-generated content.

In 2009, the Company intends to cut operating and capital costs by $40 million to $45 million in cash on an annual run rate basis. OWW also expects to continue to realize significant savings from focusing on the productivity of its e-marketing spending. For example, in the second quarter of 2009, marketing expenses fell 34% as the Company relied less on search engines to bring in buyers and made an effort to attract more non-paid traffic. The ongoing focus on marketing efficiency and the considerable incremental volume it has seen to-date as a result of the air bookings fee removal, give OWW the flexibility to sustain these actions.

The Company has partner marketing agreements with more than 150 destination marketing organizations. In the recent months, OWW signed a large number of new deals with destination marketing organizations, including San Diego Tourism, Visit Mexico, the Taiwan Tourism Board, the Swiss National Tourism Office, the Aruba Tourism Authority and the Canada Tourism Commission. Through these relationships, the Company promotes travel to partners’ destinations across its global sites while at the same time providing helpful travel information to its customers. On the media front, in July, OWW re-launched Trip.com, a productivity-enhancing facilitated search tool that helps customers search for deals across multiple sites.

Concerned by a slowdown in travel, Standard & Poor’s cut its rating on a $685 million credit agreement held by OWW, in August. S&P affirmed its “B” corporate credit rating for the online travel agency with a “Negative” outlook, but cut the secured credit agreement rating one notch to “B+” from “BB-.”Along with a slump in travel, S&P cited the loss of certain booking fees.

According to Forrester Research, in the U.S., there are 15% fewer travelers who enjoy using the Web in 2009 than there were in 2007. Just one in three domestic online travelers feels that travel Web sites do a good job presenting travel choices, down from 39% in 2008. Meanwhile, in Europe, 73% of travelers are now online, up from 64% in 2007. They, however, feel the brunt of the recession — 38% of European travelers are financially worse off now than they were a year ago. Although, business travel remains depressed, there is seen an increase in online travel shopping, which is reflecting the value tint of the American consumer. Thus, despite a difficult economic climate, leisure travel demand for the summer peak season has been stronger than expected, driven in part by the availability of compelling discounts. The U.S. online travel sales are projected to reach nearly $158 billion in 2013, up from nearly $117 billion in 2009 and $110 billion in 2008.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui

OWW is trading above its 13-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

The Company’s MACD is indicating a weak bearish signal. Although the indicator is above the critical level of 0, which implies that the underlying moving averages are bullish, the MACD has crossed below its 9-day moving average or signal line. This suggests that positive momentum has begun to slow.

OWW is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

Comparative Analysis

Across North America and Europe, the Company aggregates significant customer demand with its Orbitz, CheapTickets and ebookers brands. In the first half of 2009, OWW had more than $5 billion in worldwide gross bookings. Looking forward, the Company recognizes that building out its hotel business is the most important long-term strategic initiative for the Company. Meanwhile, the worldwide hotel market is vast, over $300 billion in value. There are only two large competitors for the Company’s hotel business: Priceline (PCLN) and Expedia (EXPE), which already established significant franchises on both continents. However, OWW still has the capacity to capture a share of the rapidly growing international hotel market.

Company Name	Ticker	Price per	Mrkt. Cap.	P/E		P/S
Sep-22-2009	symbol	Share, $	$ Mn	2009	2010	2009	2010
priceline.com Inc.	PCLN	166.00	7,020	22.22	18.74	3.10	2.66
Expedia Inc.	EXPE	24.28	7,000	19.58	16.98	2.44	2.20
Travelzoo Inc.	TZOO	11.83	194.5	n/m	78.87	2.14	2.06
Ctrip.com International Ltd.	CTRP	56.3	3,770	40.80	31.10	13.74	10.38
Median				22.22	24.92	2.77	2.43
Orbitz Worldwide Inc.	OWW	6.22	520.7	n/m	32.74	0.70	0.66

Source: Thomson Reuters; Yahoo! Finance.

Insider Trading Activity

Net Share Purchase Activity

Insider Purchases – Last 6 Months
	Shares	Trans
Purchases	N/A	0
Sales	N/A	0
Net Shares Purchased (Sold)	N/A	0
Total Insider Shares Held	1.90M	N/A
% Net Shares Purchased (Sold)	0.0%	N/A

Data provided by Thomson Financial

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