1-Star Stocks Poised to Plunge: priceline.com?

Based on the aggregated intelligence of 140,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, online travel company priceline.com (Nasdaq: PCLN  ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at priceline's business and see what CAPS investors are saying about the stock right now.

priceline facts

Headquarters (Founded)

Norwalk, Conn. (1997)

Market Cap

$6.9 billion

Industry

Internet retail

Trailing-12-Month Revenue

$2.03 billion

Management

CEO Jeffery Boyd (since November 2002)

CFO Daniel Finnegan (since January 2009)

Cash/Debt

$598.5 million/$356.5 million

P/E Ratio (PCLN and S&P 500)

35.2 and 18.2

1-Year Return

168%

Competitors

Expedia (Nasdaq: EXPE  )

Google (Nasdaq: GOOG  )

Yahoo! (Nasdaq: YHOO  )

CAPS Members Bearish on PCLN Also Bearish on

Apple (Nasdaq: AAPL  )

Research In Motion (Nasdaq: RIMM  )

CAPS Members Bullish on PCLN Also Bullish on

Palm (Nasdaq: PALM  )

Sources: Capital IQ (a division of Standard & Poor's), Morningstar, and Motley Fool CAPS.

On CAPS, 29.8% of the 841 members who have rated priceline believe the stock will underperform the S&P 500 going forward. These bears include markodegr8 and All-Star JakilaTheHun, who is the ranked in the top 0.1% of our community.

Just last month, markodegra8 noted that priceline "has a huge market cap of nearly 7 billion dollars, and it simply cannot continue growing at a high enough pace to match its current trading price." Our CAPS member concludes: "There are more competitors, people are traveling less, etc., I honestly cannot see how this stock will continue trading at such a huge price."

In an earlier pitch, JakilaTheHun also advises Fools to fly away. Here's an excerpt:

There's a very important concept in business that I think a lot of people tend to over look. It's called "abnormal earnings." The basic idea behind the concept is that there is a certain level of profitability that a certain industry will achieve over the long-term. Companies can only earn "abnormal earnings" under specific scenarios. When you hear people talk about "a moat", they are in essence talking about abnormal earnings that might be protected via market position, some long-term competitive advantage, or a patent/copyright.

The problem for [priceline] is that I'm not necessarily convinced that Internet hotel and airline booking is the type of industry where a company can build a huge moat. [priceline] has a name-brand advantage after years of advertising, but with 30% margins, I simply believe that some savvy business people are going to find a way to get their share of the pie.

What do you think about priceline, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. The CAPS community is waiting to hear your opinions. CAPS is 100% free, so get started!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Priceline and Apple are Motley Fool Stock Advisor picks. Google is a recommendation of Rule Breakers. The Fool's disclosure policy always gets a perfect score.


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