What happened

Share of online travel giant Priceline Group (NASDAQ:BKNG) tumbled on Wednesday despite a strong second-quarter report. Priceline's guidance seems to be the culprit, with the company calling for a slowdown in travel bookings and earnings below analyst expectations. As of 12:36 p.m. EDT, the stock was down 7.3%.

So what

Priceline reported second-quarter revenue of $3.02 billion, up 18.3% year over year and $30 million higher than the average analyst estimate. Gross travel bookings were $20.8 billion, up 16% year over year, and up 19% adjusted for currency. The company booked 170 million room nights during the quarter, up 21% year over year, while airline ticket bookings fell 8.7% to 1.8 million.

The view from a balcony of a hotel, overlooking a city.

Image source: Priceline Group.

Non-GAAP EPS came in at $15.14, up 20% from the prior-year period and $0.94 above analyst expectations. Higher operating costs were more than offset by revenue growth and an improved gross margin. "We are pleased with the performance of the business and will continue to build our franchise by adding properties to the platform and by investing in technology, customer experience and content expansion," said Priceline CEO Glenn Fogel.

While Priceline's results beat expectations, the company's guidance wasn't quite as rosy. Priceline expects total gross travel bookings to grow by 9% to 14% year over year adjusted for currency during the third quarter, a significant slowdown compared to the second quarter. Non-GAAP EPS is expected between $32.40 and $34.10, below the average analyst estimate of $34.14.

Now what

Shares of Priceline have surged in recent years, up more than 200% over the past five years, and up more than 2,000% over the past 10 years. The stock is far from cheap as a result of that surge, trading for around 44 times 2016 GAAP earnings. The company's strong growth justifies a premium valuation, but an outlook calling for a slowdown in growth has investors putting on the brakes.

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