It's More Than Just Cheap Travel

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.

For related Foolishness:

Ctrip.com is a Motley Fool Hidden Gems recommendation, and Priceline.com is a Stock Advisor pick. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz has been booking travel online since the 1990s but does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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