Reports that ride-hailing app Uber Technologies Inc (NYSE:UBER, ETR:UT8) is exploring the potential acquisition of travel platform Expedia Group Inc (NASDAQ:EXPE, ETR:E3X1) have come as a "somewhat surprise" to analysts at Citi.
The Financial Times first reported on Thursday that Uber is exploring a takeover bid for Expedia, with talks in the early stages.
Uber CEO Dara Khosrowshahi served as CEO of Expedia from 2005 to 2017 and remains a non-executive member of Expedia’s board.
Shares of Expedia closed nearly 5% higher on Thursday following the report and gained another 1% at about $160 on Friday. Shares of Uber, on the other hand, traded 1.2% lower at about $79.
Neither Uber of Expedia has commented on the report.
“We would be somewhat surprised to see Uber acquire Expedia as Expedia completes its turnaround,” Citi’s analysts wrote in a note to clients.
“We note it would add to Uber's increasingly diverse offering across rides, food, goods, and experiences under its super-app approach, not to mention management familiarity, and we note Expedia's consistent operating profile.”
They remain positive on Uber, repeating their ‘Buy’ rating and $98 price target.
“To be clear, we believe Uber has multiple levers of growth ahead, including its new mobility modalities, grocery, and autonomous vehicles (AVs), and while travel is a meaningful component of trips, we believe Uber is likely more focused on its core growth drivers and we would take advantage of any dislocation in shares,” analysts concluded.