Priceline.com (Nasdaq: PCLN ) users are notorious for aiming too low in trying to score great deals on the "name your own price" travel site. I guess analysts are simply following suit.
Shares rose 17% on Thursday, after the company posted blowout quarterly results. Revenue climbed 21% to $406 million and would have been even higher if it wasn't for setbacks in currency exchange rates. Earnings on a pro forma basis increased 34% to $1.29 a share.
Wall Street was expecting a profit of only $1.05 a share, but what else is new? Priceline has now obliterated analyst profit targets in each of the past 11 quarters. It hasn't even been close lately.
| |
EPS
|
Estimated
|
Difference
|
|
Q1 2008
|
$0.76
|
$0.60
|
27%
|
|
Q2 2008
|
$1.55
|
$1.41
|
10%
|
|
Q3 2008
|
$2.39
|
$2.10
|
14%
|
|
Q4 2008
|
$1.29
|
$1.05
|
23%
|
Source: Earnings.com.
Consistently thumping Mr. Market by a double-digit percentage is puzzling, especially while most of the other travel portals are struggling. Rival Expedia (Nasdaq: EXPE ) coughed up a hairball Thursday, with revenue, earnings, and gross bookings falling during the same three months.
One might assume that Priceline's flagship travel-bidding service is benefiting from a penny-pinching economy, but that isn't enough of an explanation. If success was handcuffed to vacation deals, travel publisher Travelzoo (Nasdaq: TZOO ) would also be booming. It's not. Travelzoo posted a quarterly loss earlier this month, on a 2% drop in North American revenue.
In short, Priceline is thriving by swiping market share from competing portals like Expedia and Orbitz Worldwide (NYSE: OWW ) . It is even growing faster than more exotic travel plays like Chinese specialists Ctrip.com (Nasdaq: CTRP ) and eLong (Nasdaq: LONG ) .
Priceline's management sees growth decelerating during the current quarter, with pro forma profitability projected at $0.85 a share to $0.95 a share. Don't worry. Low-balling analysts are targeting earnings of only $0.81 a share.
You can already figure out how this will play out. Analysts will scramble to raise their guesstimates, with a good chance that they will aim too low again.
In one of my favorite William "The Negotiator" Shatner ads, he's goading a Priceline customer into not overbidding for a stay.
"Namby-pamby," he says. "Go lower."
So I guess it's time to turn the tables on the analysts, hoping that they'll finally get it right.
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