dcsimg
RealTime IT News

Priceline.com May Offer Another Bargain

You'd think revenue growth of more than 1,500% would impress investors, but the initial reaction to priceline.com's Q3 report released late Thursday indicates otherwise.

Shares of the "name-your-price" e-tailer's stock were down more than 8% to 62 5/16 early Friday afternoon.

In the quarter ended Sept. 30, priceline.com's (PCLN) revenue skyrocketed to $152 million from $9.2 million in Q3 of last year. Driving the surge was a huge increase in the sale of airline tickets - the company's bread-and-butter.

But the increase came at a cost, and that's what investors initially seem to be focusing on. The Q3 loss of $102.2 million, or 71 cents per share, includes $88.4 million in costs related to a deal with Continental Airlines (CAI), which provides tickets to priceline.com.

Excluding those costs and other one-time charges, priceline.com's operating loss of 8 cents a share beats consensus street estimates of 10 cents a share. In the same quarter last year, net loss was 19 cents per share.

Further, priceline.com is making progress in an area cited as a challenge for many e-tailers - increasing gross margin. By selling fewer airline tickets and hotel rooms below cost, priceline.com boosted its gross margin in Q3 to 12.2%, compared to only 4% in the year-ago quarter.

priceline.com executives predict that Q4 revenues will not exceed Q3's, though the company accurately noted that travel bookings usually tail off during holiday season.

If that holds true, priceline.com should finish 1999 with annual revenues of about $465 million. With a current market cap of $8.9 billion, this leaves priceline.com valued around 20x revenue. That's lower than other e-tailers such as eToys (70x estimated '99 revenues) and higher than Amazon.com (14x).

Still, PCLN shares are trading much closer to their Sept. 13 low of 53 = than their April 30 high of 165. If you've been looking for an opportunity to invest in priceline.com, this could be a pretty good time to do it.


ALL NEW! internet.com's HotWatch a monthly e-mail subscription for $99, featuring Internet Stock Report's top 10 noteworthy Internet stocks for the month. Each month you will receive in-depth analysis on the top 10 Internet stocks to watch with the information you need to assess the fast-paced nature of Internet stocks. Staying on top of market changes in the Internet Stock market is what counts. For $99 per year, you receive 12 timely issues sent to you by e-mail. Don't wait, our next issue will be out before you know it with a whole new perspective on the market. Sign up today at: e-newsletters



×
We have made updates to our Privacy Policy to reflect the implementation of the General Data Protection Regulation.