Analysts Have an Altitude Problem

Look! Up in the sky! It's a bird! It's a plane! No, it's priceline.com (Nasdaq: PCLN  ) .

Shares of the recession-bucking travel portal opened 12% higher -- and kept rising -- after delivering yet another better-than-expected quarter. When David Gardner recommended Priceline to Motley Fool Stock Advisor subscribers five years ago, the company traded at $23.71. Today, the stock has gained more than that entire amount in a single day. We call that a daybagger -- or a spiffy-pop -- around here.

Revenue climbed 30% to $730.7 million, fueled by a 33% surge in gross travel bookings. Proving its worth as a scalable model, margins widened during the period as pro forma net income clocked in at $3.45 a share, 44% ahead of where Priceline was perched a year ago.

This is getting ridiculous, Wall Street. Priceline has now blown past analyst estimates for 14 quarters in a row. The incompetence of Priceline modelers is great news for Priceline shareholders, because the pros haven't even come close lately.

Period

EPS Est.

Actual

Surprise

Q4 2008

$1.05

$1.27

23%

Q1 2009

$0.91

$1.09

20%

Q2 2009

$1.78

$2.02

14%

Q3 2009

$2.92

$3.45

18%

Source: Yahoo! Finance.

That's insane. This isn't a matter of bringing out the yard markers for a measurement. Priceline has overshot Wall Street targets by 14% to 23% over the past year.

Yes, many hoteliers are suffering during the recession, but the need to fill vacant rooms with warm bodies has helped hotel room nights booked through Priceline increase a staggering 56%. Despite the fee-slashing promotions of rivals Expedia (Nasdaq: EXPE  ) and Orbtiz Worldwide (NYSE: OWW  ) , airline tickets are also up sharply.

Prospective travelers feel as if they're entitled to deals in this soft economy. Priceline isn't the only one delivering them. Travel-deals publisher Travelzoo (Nasdaq: TZOO  ) is never too far away with its weekly promotional emails. Expedia has Hotwire. Orbitz has CheapTickets.com. Microsoft's (Nasdaq: MSFT  ) Bing has made travel comparison a major component of the rookie search engine.

In a competitive landscape, Priceline has nonetheless made the pros look like lowballing buffoons for more than three years now.

When will Wall Street learn the pitfalls of underestimation? For shareholders' sake, let's hope that it doesn't happen soon.

priceline.com is a Motley Fool Stock Advisor recommendation. Microsoft is a Motley Fool Inside Value recommendation. Microsoft is a Motley Fool Options selection. Try any of our Foolish newsletters services, free for 30 days. You'll feel smarter than Wall Street.

Longtime Fool contributor Rick Munarriz has been inspired by a deal or two on the Travelzoo Top 20 list but he does not own shares in any of the companies mentioned 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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