Stock Markets Rise and Priceline Looks to Expand Booking Dominance

Priceline is paying a lot for OpenTable, but it makes a lot of sense over the long term.

Jun 13, 2014 at 3:30PM
Longview

U.S. stock markets are up slightly today, in part because President Barack Obama said he won't send troops back to Iraq, where insurgents are pushing toward the capital. Fear that the U.S. would get involved helped push the markets down yesterday, so there was a little relief from his comments.

The Dow Jones Industrial Average (DJINDICES:^DJI) was up 0.11% late in the day, driven by Intel's 6.6% bounce on the chipmaker's announcement that higher than expected PC sales would lead to higher revenue in this quarter. That pushed Microsoft and Hewlett-Packard higher and the tech bounce was on.

One tech company that didn't enjoy the gains but made big news was Priceline (NASDAQ:PCLN), which is buying online restaurant reservation service OpenTable (NASDAQ:OPEN) for $2.6 billion.

Why Priceline was shopping today
Priceline's $103 per share offer was an incredible 46% premium to OpenTable's closing price yesterday, and the stock shot up 47% as a result. OpenTable's shares were actually trading for more than $104 late in the day, an indication that some traders think the price could be increased before the deal closes. That's speculation and a risky bet for investors, but what's interesting is why the online travel discount specialist would want to pay so much for a company with $190 million in revenue and just $33.4 million in profit last year.  

CEO Darren Huston correctly told investors that travelers are also diners, so the synergies between the two companies are natural. If Priceline can get you to book airfare or a hotel on one of its platforms it could easily line up a reservation at a local restaurant as well.  

But the company will also be able to bring OpenTable's platform to Europe, where Priceline has a large business. Priceline has been successful in integrating and expanding acquisitions such as Kayak.com in the past, so there's reason to think that OpenTable could do just as well.

Sometimes with acquisitions it's more important to look at how a company will integrate an acquisition rather than what it's buying the company for. Priceline can gain more contact points and revenue opportunities with customers through the acquisition, so it's worth paying a premium price. Building out the same infrastructure would have been extremely expensive and OpenTable is the premier name in online reservations. So while Priceline's shares may be down 3% in trading after the deal was announced, I think it's a solid strategic move for the company.

Will this stock be your next multibagger?
Give us five minutes and we'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends OpenTable and Priceline Group. The Motley Fool owns shares of Priceline Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers