It's been a long time coming, but travel website KAYAK is finally scheduled to IPO next week at a value of nearly $1 billion. The stock is set to bow in the $22-$25 per share range after several fits and starts on the way to public offering over the past couple years. 2011 revenues clocked in at $225 million, with $9.7 million of it dropping to the bottom line, giving the company a Price/Sales ratio of 4.43:1 (reasonable by today's standards) and a Price/Earnings ratio of roughly 100:1 (unfortunately, also reasonable by today's standards). KYAK is the proposed symbol and the stock will trade on NASDAQ.
I'm a fan of KAYAK, but you won't see me queuing up to buy the IPO. Even if the valuation weren't too rich for my blood (it is), the company is far too dependent upon the whims of the companies which provide them data. The contracts they have in place with their participating airlines (to provide schedule and fare data) can be terminated with 30 days notice and, even worse, the airlines can decide to just stop paying them for the business they send and KAYAK has no recourse. With the consolidation in the airline business these days, the trend seems to be toward the Southwest Airlines model where the airline handles all its own bookings. That does not bode well for KAYAK (and the bevy of similar travel aggregaters).
An even scarier scenario is that all their airline partners play nice and continue to provide all the data KAYAK needs to stay in business, but then Google yanks the rug out from under them (as Google has been well known to do).
You see, 55% of the search results KAYAK displayed in 2011 were provided by ITA software - which Google acquired in 2010. KAYAK's contract with ITA expires on on December 31, 2013, and Google has already begun to roll out it's own travel aggregater based on ITA software. I can't imagine they'll be too keen to keep a competitor in business when that competitor essentially depends upon a service Google can easily shut off.
This IPO, and to a larger extent the underlying stock, is for gamblers only. Like I said above, I love the company and some of the innovations they've introduced over the past couple years, but they've got some hurricane clouds on the horizon and you'd have to really be willing to roll the dice to go big on this one.
What do you guys think? Is the deal overvalued? Will the IPO work out or will it flop? Am I right and the risks are far too great, or am I just being a sissy?
I think the GOOG concern is really what is most scary here...
you say
...why? Are there other airlines that are refusing to go on Kayak like Southwest?Personally, I'm all about Mobissimo.
Patrick,
All of the airlines have made noise about it at one time or another. It's always been a sort of looming threat. Here's just one example of when American pulled the plug on them:
http://techcrunch.com/2008/07/23/trouble-in-online-travel-american-airl…
Another big potential problem that I didn't even mention is that nearly all of KAYAK's hotel listings fall under the umbrella of 5 hotel chains. Pretty massive risk exposure if any of them decide to change things up. That's a big chunk of business.
Wouldn't Google get fucked in the ass with an anti-trust lawsuit if they pulled that sort of move? I can't imagine that they'll cut their data or jack rates too exorbitantly for KAYAK (or anyone, for that matter) because the DOJ would take them out back and beat them like a government mule.
King,
On the surface I'd agree with that logic, but based on past decisions they've made where anti-trust is a concern, Google tends to take the "beg forgiveness rather than permission" approach. It seems like a concerted strategy on their part to continue moving the anti-trust goalposts (whether it be anti-competitive stuff like a move like this or some of the other shenanigans they've been called on). It'll be interesting to see what happens, that's for sure.
Have any of you used www.hipmunk.com? Blows the Kayak user interface out of the water - its very elegant and simple displaying the results and a very intuitive manner, and you can run multiple searches via built in tabs at the same time. I was always a big user of Kayak but since I've come across HipMunk I've switched. My guess is that Hipmunk gets acquired by Kayak or another competitor for its interface.
I've seen HipMunk. To be honest, the user face might be nice, but I find it so painfully lame. This might be weird, but I feel like I'd hate the people involved in its creation, just reeks of painful hipster crap.
I actually know a couple of people that directly use ITA as their service of choice. If you don't mind having a blah user interface, it's pretty solid.
What do you mean by painfully lame. Sure the stupid chipmunk is dorky but as far as sorting flights based on price, time, airline, layovers, wifi, etc. is concerned its a superior interface.
I've never seen the ITA interface until now based on your suggestion and it is nice like Hipmunks as well. So to me either one is better than Kayak.
first off, ke18sb, welcome back to WSO!....I think you are by far the longest tenured Certified User...you are user # 93. wow.
secondly, i think I had tried hipmonk out once before but for some reason didnt go back. Does it use the same data as Kayak?
Ha, yea its for sure been a while since I switched over from the valut.com to ibankingoasis. I think it uses the same data as kayak but I can't comment for sure. I think its great for planning purposes in the visual sense.
trying to go public at a terrible time and only so your investors can cash out is a desperate move. no one thinks this company has long term prospects.
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