The Week in Stocks: Expedia Makes a Thrilling Offer
...That Shareholders Should Refuse.
On Friday, Expedia (EXPE) unveiled plans to buy back up to 10% of its shares outstanding through a tender offer. Morningstar analyst Sumit Desai is thrilled to see the company put its nearly $1 billion cash hoard to use. Desai also points out that the company indicated that its directors and officers and Liberty Media (LINTA) do not intend to tender any of their shares. In Desai's opinion, this decision to forgo the tender offer reflects management's belief that Expedia has a brighter future ahead of itself. Desai agrees, as the stock continues to trade at a considerable discount to his fair value estimate. For that reason, he recommends that current shareholders follow management's lead by holding on to their shares, as the tender offer price still does not fully reflect the company's intrinsic worth. Desai is maintaining his fair value estimate for now, but could raise it by a few dollars depending on how many shares are actually tendered.
Full Analyst Report: Expedia
Novartis Sells Part of Consumer Unit
On Thursday, Novartis (NVS) announced that it was selling its medical nutrition business to Nestle (NSRGY) for $2.5 billion. In reviewing the deal, Morningstar analyst Heather Brilliant points out that the medical nutrition unit--which includes nutritional products and medical devices used to provide sustenance to patients who are typically unable to consume adequate nutrition on their own--is a small part of Novartis' overall consumer health business. As such, the sale should have no material impact on her fair value estimate. Separately, Novartis also announced that the FDA had extended its review of the company's Tekturna hypertension drug. Novartis provided additional data on the drug in early December, so the FDA probably intends to take extra time to incorporate that new data into Novartis' application. This announcement also does not affect Brilliant's fair value estimate, as she had not expected Tekturna to reach the market until 2008, a timetable she thinks is still achievable.
Full Analyst Report: Novartis AG
Jeffrey Ptak does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.