HomeAway (NASDAQ:AWAY) is the market leader in the online vacation rental space, with its market share estimated to be 40%. Despite hosting over 1 million vacation listings and attracting approximately 900 million website visits each year, the company does not appeal from an investment perspective.
The company trades at expensive price multiples, and I have considerable reservations as to whether it can deliver on the earnings front. This view is held due to increased competition, rising marketing costs and the challenges faced in overseas markets such as Europe.
Furthermore, the recent downturn in price means there is now upside resistance, which, in the near term, caps the upside potential.
The revenue is growing, but based on aggressive FY16 earnings growth forecasts, HomeAway trades at a P/E of 36.5x and a PEG of 2.1.
Increased competition, rising marketing costs, regulatory challenges and foreign market characteristics pose a risk to future earnings growth. The price is in a downtrend, backed by declining momentum that has been negative for the past six weeks.
So based on overall outlook, it looks good to buy put options in company’s stock.