Shares of Priceline (PCLN) and Expedia (EXPE) are sliding after MKM Partners analyst Rob Sanderson downgraded the stocks to Neutral, saying it will take several quarters to resolve the uncertainties surrounding the online travel sector, and that the latter still faces a “significant lower earnings outlook.”

SECTOR UNCERTAINTIES: In a research note to investors this morning, MKM Partners’ Sanderson downgraded Priceline to Neutral from Buy and lowered his price target on the shares to $1,850 from $2,225. The analyst noted that he sees a multitude of uncertainties surrounding the online travel sector, most of which he thinks will take several quarters to resolve. While he acknowledged that Priceline’s stock has underperformed since the company reported its second quarter results in early August, Sanderson told investors that he does not think the share price performance will improve meaningfully until clarity on at least a few issues is established. Additionally, the analyst is concerned by ecosystem friction and the decision to shift spending away from performance into brand advertising, where payback periods are longer and less tangible. He also worries about plans to step up investment in the vacation rentals business, deceleration in bookings growth to post-recession lows, and Street assumptions that earnings per share growth will re-accelerate in 2019 to rates higher than this year.

LOWER EARNINGS OUTLOOK: Meanwhile, MKM Partners’ Sanderson also downgraded Expedia to Neutral from Buy and lowered his price target on the shares to $115 from $170, citing a “significantly lower earnings outlook” for the company as well as “cyclical and structural uncertainties” for online travel agencies over the next several quarters. Nonetheless, Sanderson noted that fundamentals may not be broken longer-term. The analyst argued he is more concerned about cyclical factors over the next several quarters. Structural issues could represent a number of smaller headwinds, but each are incremental, he added, noting that while the stock is not expensive, he does not expect a recovery until clarity on multiple fronts is established.