Wednesday, October 26, 2011

There's no place like home: Commentary on HomeAway's NASDAQ stock.

The Motley Fool - an investors web site - comments on HomeAway.  This year HomeAway went public on the stock market, and the stock market just doesn't understand its business model and the vacation rental home market that it serves.  Good luck HomeAway.

Close your eyes and click your heels together three times and I guarantee you the valuation on HomeAway (Nasdaq: AWAY ) still won't make a lick of sense. Having just come public in late June, investors are readying for the vacation rental company's first earnings report as a public company. Needless to say, estimates for the quarter vary widely according to Yahoo! Finance, from a profit of $0.07 to as high as $0.13. So if the company is profitable, everything is just peachy, right? Wrong!

Every aspect of housing indicates that consumers are becoming even tighter with their spending -- perhaps even the upper echelon spenders, which is what HomeAway caters to. Home prices remain deflated, foreclosures are rising again, and mortgage applications dropped by double digits this past week, all signs which point to consumers' unwillingness to spend. And if that wasn't enough, perhaps HomeAway's trailing 12-month P/E of 493 and negative book value will take care of the rest for you. If results aren't stellar, all the king's horses and all the king's men won't be able to put this valuation together ever again.

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