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.
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