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Shares of the online travel conglomerate rose by more than 7% Wednesday after a report that private equity firms Apollo Group and Silver Lake Partners are in talks to purchase a $1 billion stake in the company. The talks were first reported by The Wall Street Journal.
The stock climbed another 3% in Thursday’s premarket trading after Expedia confirmed it would be raising $3.2 billion in total new capital via affiliates of the two firms, each of which will receive one seat on the company’s board.
To some, like Miller Tabak chief market strategist Matt Maley, investors have better places to put their cash to work.
“On the charts, it’s a broken stock right now,” Maley said Wednesday on CNBC’s “Trading Nation.” “That doesn’t mean it can’t bounce back, but … even before the coronavirus hit, the stock had broken down badly below its long-term trend line going back almost 10 years.”
When Expedia managed to rally back to that key trend line in early 2020, it couldn’t break it and rolled over again, also “in a meaningful way,” Maley said.
“That second decline … also took it below a multiyear descending triangle pattern. So, on a purely technical basis, it looks quite bad,” he said.
Maley added that while private equity’s interest in Expedia wasn’t something to ignore, it shouldn’t be the reason for buyers to jump in.
“With so many other stocks down quite a bit, too, I think individual investors might want to look at some other stocks where they would take less risk,” he said.
Michael Bapis, managing director at Vios Advisors of Rockefeller Capital Management, said in the same interview that private equity firms appear to be “sitting on loads of cash” and looking for deals with long-term benefits.
With “two of the best PE firms looking at Expedia specifically, … I think in a technology-driven society where the consumer will continue to use companies like Expedia to do travel, the demand will return, and I think this bodes well for the stock long term,” Bapis said.
“But, again, the key is a long-term perspective: two, three, four, five years. And if you take that perspective, I think you’ll benefit in the long run,” he said.
Expedia shares are down more than 43% year to date.The stock closed at $61.42 on Wednesday