Expedia hits 52-week low as analyst prefers Google

Mark Mahaney said the outlook for the search industry is strong because advertisers believe Web search ads offer the best return on their investment. But he thinks Expedia is vulnerable to weakening economic trends in, and decreasing travel to, Europe. He placed Google at the top of his Top Picks Live list, and removed Expedia from that portfolio.

Mahaney cut his price target on Expedia shares to $31 from $37, and kept a "Buy" rating on the stock. He has a price target of $630 on Google shares.

In afternoon trading, Expedia shares fell 60 cents, or 3.1 percent, to $18.56, and they reached an annual low of $18.31. Google stock added $1.81 to $529.88.

The analyst said Google should meet expectations in the second quarter despite economic struggles in the U.S., and he said mobile search and display ads present a significant opportunity for the company.

Mahaney said Expedia should have used a recent offering of notes to buy back its own stock because its shares are trading at their lowest prices since late 2006. He added that search advertising competition is growing.

Mahaney's price target implies Google shares will rise 19.3 percent over the next year. His target on Expedia shares implies 61.8 percent growth.

Expedia declined a request for comment.