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The Money Man Behind Rick Santorum: Who Is Foster S. Friess?The shares of Orbitz Worldwide, Inc. (NYSE: OWW) are skidding all over the charts today following the company's second-quarter earnings release. Orbitz confessed to a net loss of $5 million, or six cents per share, much improved from its year-ago loss of $32 million. Revenue for the recently concluded quarter inched 1% higher to $231 million.
While the results were better than the same quarter in 2007, analysts were looking for an even smaller loss of three cents per share on more robust revenue of $234 million.
Gross bookings increased 4% to $3 billion, thanks to a little help from overseas -- international bookings rocketed 41% higher, compared to a 1% slump in domestic bookings. Orbitz's international business now accounts for 23% of its revenue, up three percentage points from the year prior.
Despite the challenges facing Orbitz, president and CEO Steven Barnhart professed his enthusiasm about some new initiatives to drive growth. Specifically, the travel firm is launching a new "Price Assurance" functionality, and the company just entered a multi-year partnership with Microsoft (NASDAQ: MSFT) to serve as the online provider for MSN.com's travel portals. Barnhart said these initiatives "will accelerate our domestic growth in the second half of the year and help offset any impact from current economic and travel industry uncertainty."
Wall Street's initial reaction to the report was negative, with Orbitz shares down nearly 12% during the first half-hour of trading. The equity rebounded sharply enough to make a brief appearance in positive territory, but is resting on a smaller loss of about 3% as of 10:45 am.
Orbitz shares are down 32% year-to-date, and the stock has recently been stifled by resistance from its 50-day and 80-day moving averages. Nonetheless, speculative traders had high hopes ahead of the second-quarter report. According to data from the International Securities Exchange (ISE), traders have purchased nearly two call options to open for every one put on OWW during the past 10 trading days.
Peak call open interest in the August series lies at the 10 strike; the stock would need to rally about 74% from yesterday's closing price to tap this round-number region. If any of the new crop of Orbitz bulls are spooked into closing out their optimistic option contracts, the resulting selling pressure could exacerbate the shares' decline.
Elsewhere in the online travel sector, shares of Priceline.com (NASDAQ: PCLN) are also getting hammered in the wake of an uninspiring second-quarter report.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the weekly video series Option Basics on SchaeffersResearch.com.
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