Wotif's share price plunges 31%
Recommendation
The share price of online accommodation booking company Wotif.com has plunged 31% after the company announced its interim profit will fall around 20%. At $2.90, the share price is above the $2.00 float price but well below its first day closing price of $3.35. With a 5% fall in accommodation booking revenue in Australasia offset by an increase in flight bookings and package sales, the major problem appears to be a blow out in costs as advertising and technology are beefed up to compete with fierce rivals.
Longer term this company faces significant threats from global operators, such as Expedia and Priceline, and as technology improves there should be more operators prepared to accept lower booking fees than what Wotif charges. At best that would reduce Wotif's margins, but at worst it could decimate the business. Given the fundamental threats to this company's business there's no need to rush in and we'll update the situation and the recommendation guide in the new year. Until then Wotif is UNDER REVIEW.