Expedia Inc. (EXPE): Itinerary - $90 says Susquehanna (but maybe more)

Expedia Inc. (NASDAQ:EXPE) shares are travelling higher today, up more than $2.50 as we type, The 3.5% move up comes compliments of an upgrade from Susquehanna. The broker says the stock now gets a "Positive" rating versus yesterday's "Neutral" recommendation.

Analyst, Brian Nowak put a $90 price-target on EXPE along with his upgrade – potential upside to target of 16.69% as of this keystroke, not including the 0.8% dividend.

Expedia operates as an online travel company in the United States and internationally. It provides travel products and services to leisure and corporate travelers, offline retail travel agents, and travel service providers through a portfolio of brands, including Expedia.com, Hotels.com, Hotwire.com, Expedia Affiliate Network, Classic Vacations, Expedia Local Expert, Egencia, Expedia CruiseShipCenters, eLong, and Venere.com.

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Nowak believes the company's prospects are discounted by his peers on the street. He pronounced, "Our updated breakdown of EXPE's 3 main businesses (Travelocity, Trivago, and "core") shows how Street EPS numbers are 3% and 4% too low in '14 and '15 even using conservative assumptions."

To get to $90, the analysts wrote, "We raise our target multiple to a 25% premium based on faster EPS growth (19% the next 3 years) and see upward revisions, execution, and faster growth driving outperformance."

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It's clear; Nowak's upgrade and price-target are earnings based calls.

As it is now, Wall Street has consensus EPS estimates of $3.84 and $4.47 for 2014 and 2015, respectively. Minimally, Nowak believes the numbers will be closer to $3.96 this year and $4.60 next year, which is year-over-year growth of 16.16%.

To hit $90 based on the updated, minimum earnings, according to Susquehanna would require investors to pay 19.57 times earnings-per-share (EPS). In the last half-decade, Expedia's average price-to-earnings ratio (P/E) was 22.19 with a range of 6.29 to 68.49. During the same timeframe, EXPE earnings contracted by an average annual rate of -5.71%. That means investors have been willing to pay up for the internet service provider.

A 25% premium to earnings growth as Nowak suggests, would translate into a P/E of 20.2 using our updated, hypothetical EPS; providing some upside to the $90 target at $92.92.

Overall: If Brian Nowak has made the correct call on the street under-projecting Expedia Inc. (NASDAQ:EXPE) earnings power, then $90 should be achievable based on EXPE's recent P/E history.