Case Study Priceline 2001

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Priceline profits on increase in travel, but domestic growth down (PCLN)

Priceline.com Incorporated (PCLN), the online fixed and auction hotel reservation site, posted a 35% increase in revenues in its 2010 fourth quarter, with growth led by new markets such as Asia-Pacific and South America. From the company's press release:

"The Group's worldwide hotel business performed well for the 4th quarter and full year 2010," said Jeffery H. Boyd, Priceline President and Chief Executive Officer. "High gross travel bookings growth rates were the result of continued penetration of new markets, like Asia-Pacific and South America, where economic growth and rapid online adoption are tailwinds for the business, and solid growth in core markets in Western Europe and North America. The Group's air and rental car businesses also performed well under challenging market conditions and TravelJigsaw has made good progress with platform and website enhancements to grow our international rental car business."

Rick Aristotle Munarriz of The Motley Fool questions whether the company's strong performance (this is the 19th consecutive quarter in which PCLN has beat expectations) can continue, especially in light of the weaknesses largely being overlooked by Wall Street:

Lost in the euphoria, though, there are some rough patches worth watching.

Priceline's revenue growth came in weak because things didn't go so well domestically. A nearly 65% surge in international bookings is covering for a mere 8.5% uptick domestically. This is the first time in years that Priceline has failed to deliver double-digit growth in domestic gross bookings.

Things also aren't looking so hot in the not-so-friendly skies. This is the second quarter in a row that Priceline sold fewer flight seats than it did a year earlier.

Covestor models that hold PCLN as of end of day 2/24 – click through for more info on the models:

o CANSLIM from Peter Kurata

Sources:

"Priceline.com Reports Financial Results for 4th Quarter and Full-Year 2010? Priceline.com, 2/23/2011. http://www.sec.gov/Archives/edgar/data/1075531/000110465911010304/a11-6555_1ex99d1.htm

"Is There Turbulence Ahead for priceline.com?" Rick Aristotle Munarriz. Motley Fool, 2/25/2011. http://www.fool.com/investing/high-growth/2011/02/25/is-there-turbulence-ahead-for-pricelinecom.aspx

Frank Voisin on 27 Feb 2011

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