Orbitz shares fall after analyst downgrades on US outlook

NEW YORK—Shares of Orbitz Worldwide Inc. sank Thursday after a Piper Jaffray analyst downgraded the stock to "Neutral," citing a more challenging U.S. outlook for the online travel company.

Orbitz shares fell 80 cents, or 10.2 percent, to $7.01. In the past year, the stock has traded between $4.51 and $15.

In a client note, Piper Jaffray analyst Aaron M. Kessler lowered his rating for the online travel company from "Buy" and decreased his price target to $8 from $10.

Kessler called Orbitz's first-quarter results -- which were released Wednesday -- "weak."

The company reported its first-quarter loss widened, with results impacted by higher costs and a decline in domestic bookings, which make up the bulk of the company's gross bookings.

Kessler, who also lowered his 2008 estimates for Orbitz, added that he expects more conservative growth in its domestic market as the company indicated weakness in its domestic business is persisting and it is continuing to pull back from pricier online ad channels.

The analyst predicted that since the company has a higher degree of air bookings relative to its peers, this "will be a hindrance" as he expects U.S. leisure travelers to take fewer flights this summer.

"While Orbitz indicated they haven't seen a deterioration in the U.S. travel market fundamentals, we remain cautious on the consumer and believe it could prove difficult for Orbitz to return to its stated 9 to 12 percent U.S. growth goal in the foreseeable future," he said.

He thinks international growth will stay strong but noted that international business makes up just 25 percent of the company's revenue.