Priceline (BKNG 0.43%) has been under considerable selling pressure lately. Shares of the online travel leader declined by more than 30% from November of 2015 until the company reported earnings on February 17. However, Priceline's earnings report showed investors that the company is strong enough to continue producing rock-solid performance under challenging conditions, and this sent Priceline shares up by 11% in a single day after the news hit the wires. 

Let's take a look at why Priceline is proving the bears wrong, and perhaps more important, whether the company can continue delivering strong returns for investors in the future.

Priceline is facing heavy headwinds
Priceline's the online travel leader on a global scale. Competitor Expedia (EXPE 1.78%) has a big presence in the U.S., but Priceline comes second to none in international markets. Priceline produced $9.2 billion in total revenue during 2015, while Expedia generated $6.7 billion in sales during the year. Interestingly, Priceline produced nearly 90% of gross bookings from international markets, but only 35% of Expedia's gross bookings came from overseas last quarter.

This international presence is a huge advantage for Priceline in the long term. Online travel services are still a novelty in many emerging markets, and this means that Priceline will enjoy tremendous room for expansion in the years ahead. Besides, Europe is a major tourist destination for travelers from all over the world, so Priceline's leadership in this key market is a big plus for the company.

On the other hand, most global currencies are abruptly depreciating against the U.S. dollar lately, and this is having a material negative impact on Priceline's financial performance. In addition, the terrorist attacks in Paris in November of 2015 have raised growing concerns about global travel demand, especially in Europe. 

The competitive landscape is getting more crowded lately. Both Priceline and Expedia are increasing their marketing and advertising budgets, competing against each other for market share. Also, highly innovative players, such as property-sharing platform Airbnb, are always an important threat to watch, just like Priceline and Expedia are disrupting traditional travel agencies with their online platforms. Investors need to keep a close eye on new and disruptive business models that could hurt Priceline in the future.

How Priceline is dissipating the fears
Even a mediocre company can do well when the wind is at its back; however, it takes a remarkably strong business to continue thriving under difficult conditions. Priceline is delivering impressive financial performance in spite of the challenges the company is facing. Priceline produced $12 billion in gross travel bookings during the fourth quarter of 2015, a year-over-year increase of 13% in U.S. dollars, and a much stronger jump of 24% in constant currency. 

The company booked 99 million room nights during the quarter, an increase of 27% from the same quarter in 2014. Total gross profit grew 23% in constant currency during the quarter, and the business remains remarkably profitable, as Priceline produced an operating margin of nearly 35% of revenue during the full year 2015.

Importantly, the company keeps expanding its size at a vigorous rate. Priceline's main platform,, offers more than 850,000 hotels and other accommodations in more than 220 countries around the world as of the end of 2015. This represents a big annual increase of 34%. As a reference, Expedia is Priceline's closest competitor, and it has a much smaller base of 269,000 hotels on its platform.

The size of the platform is a crucial source of competitive strength for Priceline. Travelers are naturally attracted toward the bigger platforms, as they offer more and better choices. Industry operators also need to go where the travelers are, so a bigger platform is also a more valuable one to both hotel operators and travelers. This creates a self-sustaining cycle of increased size and growing competitive strength for Priceline, and it's one of the main reasons why the company keeps doing so well, even under challenging conditions.

Online travel is an exciting growth industry with plenty of room for expansion, and Priceline is a market leader with a remarkably profitable business model and rock-solid competitive strengths. Even during difficult times for the company, betting against Priceline has been a losing proposition in the past, and chances are that the company will keep crushing the bears in the future.