Expedia, Priceline shares fall as MKM turns cautious

Shares of Expedia Inc. dropped 1.7% and of Priceline Group Inc. fell 0.6% in premarket trade Thursday after analysts at MKM downgraded both stocks to neutral from buy. The analysts, led by Rob Sanderson, are concerned about falling room night growth at Expedia, which they attribute to tight supply that's driving more customers to consider "alternative" lodging options. "Near-term challenges could get worse next year," he wrote regarding Expedia. On Priceline, Sanderson is worried about the company's interest in the vacation-rental business, which may have "less favorable" economics than the hotel business. He also is concerned about the company's decision to shift its advertising strategy to one that could have long-term benefits but weigh on margins in the short run. Expedia shares have gained 5.2% so far this year, while Priceline shares are up 17.3%. The S&P 500 has advanced 17.4% in that time.

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