Priceline's (NASDAQ:BKNG) shares fell 7% last week on the news of lowered quarterly guidance.
That weaker guidance came after the company reported some very positive numbers. It saw gross bookings and room nights booked climb dramatically, but the drag on its shares may well be due to the company not currently having a CEO. Of course, Priceline has a search underway but its unique business makes that a difficult chair to fill.
In this segment from the Motley Fool Money radio show, Chris Hill and Jason Moser explain why the company's lack of a CEO is likely related to the drop, and why its hesitance in filling the position is actually a good sign for the company's long-term health.
A transcript follows the video.
This podcast was recorded on May 6, 2016.
Chris Hill: Priceline put up some nice profits in the first quarter, but the company lowered guidance for Q2, and shares are down more than 7% this week. I feel like we've seen this movie before, Jason, in terms of the guidance.
Jason Moser: Yeah, and a bit of a CEO problem, as the cherry on top. I think, with Priceline, this is really one about what in the world does the future hold for these guys, versus the performance logged this most recent quarter. The performance this most recent quarter was really solid. Gross travel bookings were up 26%, and room nights booked jumped 31%. And that is a pure demand indicator right there. That is a sign that the demand is there. And they continue to grow that network out as really the largest provider. They are notoriously pretty conservative on their guidance. I think that has something to do with this here.
But then, the CEO issues that are plaguing them right now, that's going to have to be resolved. This is a difficult industry to maneuver. There was a lot of negotiating that went on in building up this business. I think that, with Huston stepping down ... they're going to take it slowly, but they really need to make sure that they find the right fit for the CEO to take this company forward. Even though a lot of the hard work is done, this is still a very difficult industry to maneuver, because it does require constant attention, constant negotiation. That's going to be key to them being able to keep this thing growing.
Hill: I think shareholders should feel good about the fact that they were very clear: Yes, the CEO is gone, yes we need a new one, no we are not going to rush this process.
Moser: Yeah, and I think that's the way you have to look at that, because, again, this is not just some business where anybody can get in there and fill his shoes. They really need to make sure they identify someone who's not only very proficient with the market itself, but also has the inclination to stay there for many years to come, and maybe not sleep with someone who works there.
Matt Argersinger: And, Jason, I think you have a theory as to who a good fit might be for that role.
Hill: Who's on the shortlist?
Moser: (laughs) Well, I mean, you look at some of the smartest minds in this industry, and I think Steve Kaufer, the CEO at TripAdvisor (NASDAQ:TRIP), is arguably the smartest mind in this business. And given what they're doing at TripAdvisor, which is kind of becoming more like a Priceline, you could do worse. If you put Priceline and TripAdvisor together, that would be a straight-up market leader that would just plague competitors for years and years to come.