["Hot Stocks" is a new Money Morning feature that analyzes the investment outlook of global companies that are in the news. This is the fifth installment of this ongoing investment series.]
Money Morning Staff Reports
With Priceline.com Inc. (PCLN) – the name-your-own-price travel-services player – it's time to either beam up or buy in.
Priceline – the online airfare and hotel-booking firm known for its kitschy TV ad campaign that stars "Star Trek" star William Shatner as "" – is an interesting possible profit play, thanks to its strong balance sheet and market muscle in the bargain-hunting end of the travel-services sector, the financial weekly Barron's says.
The stock market has already factored in the challenges facing the travel and retail sectors into Priceline's stock price, Reuters and Barron's both reported.
According to Barron's, as the current financial crisis deepens, consumers are going to devote an increasing amount of time to their personal and household spending budgets – a point that Money Morning has repeatedly made as part of its ongoing "Credit Crisis Safety Plays" series. As those consumer concerns about spending and household budgets increase, Priceline's name-your-own-price business will become a bigger draw, Barron's, the popular investing weekly, said in its most recent edition.
Barron's also said Priceline has little debt and plenty of cash on its balance sheet, including $282 million in free cash flow this year. At Friday's closing price of $54.57, Priceline was trading at 8.8 times projected profits for 2009. That's well below the average Price/Earnings (P/E) ratio of 21 for Internet retailers, and 9.0-plus for the travel and leisure sectors, Barron's reported.
Priceline also has a tendency to report upside earnings surprises. In each of the past four quarters, the Norwalk, Conn.-based Priceline has beaten analyst estimates by amounts that range from 9.9% to as much as 27% (Please see accompanying chart).
Strategy Shift a Major Plus
According to noted travel writer Arthur Frommer, Priceline.com was largely once just "a rather exotic service meant only for the gamblers among us – the folks willing to accept the risk of a 6 a.m. flight or an out-of-the-center hotel. By featuring its bidding process ('name your own price'), Priceline.com came up with absurdly low air or hotel rates, but with the drawback of sometimes producing a dawn departure, a multi-stop flight or a badly located hotel."
But that's changed. In a story he penned for TheLedger.com, Frommer said that while Priceline "still maintains its 'name your own price' option – the way to get the very lowest prices imaginable – it now also offers the same full-disclosure airfares and hotel rates that Web sites like Hotels.com, Expedia.com (EXPE), Travelocity.com, Orbitz.com (OWW) and others offer."
The bottom line: Priceline.com often beats the prices offered by these other "full-disclosure" Web sites – and without charging the extra fees that these other sites hit users with, Frommer wrote.
The economic slowdown may also benefit Priceline. The financial crisis has hit the travel sector and the airlines hard. So the major airlines are now using Priceline.com as a way of disposing of their unsold seats – "of which there are a great many," Frommer wrote. But that's good news for the more-adventurous traveler, since the "last-minute" airfare deals feature has returned to the Priceline.com Web site, Frommer said.
Priceline is now going global. With its recent acquisition of European hotel search engine called Booking.com, Priceline.com is also has become a standard full-range search engine for hotel rates both in the United States and abroad. Booking.com is the largest of the hotel booking sites in Europe, meaning users will find offers from some of the "more interesting, nonchain, boutique-like hotels that are often absent from American hotel search engines."
When it launched its somewhat campy television ad campaign, Priceline.com was smart enough to go after the king of camp himself – Shatner, whose entire TV life has been spent playing such campy characters as Capt. James T. Kirk (Star Trek), police Sgt. T.J. Hooker (T.J. Hooker) and legal legend (in his own mind) Denny Crain (Boston Legal). Shatner's performances as the "Priceline Negotiator," have spawned kudos both for Shatner and for Priceline.
Curiously for Shatner, however, it's original "Star Trek" series veteran Leonard Nimoy (Mr. Spock), – described by one writer recently as the "master of the strained staccato delivery" who landed a role in the new Star Trek (2009) movie due out next year.
But Shatner does have a new talk show starting: Shatner's Raw Nerve debuts Dec. 2 on the Bio Channel, media reports state.
News and Related Story Links:
Priceline could be a good opportunity – Barron's.
- The Ledger.com:
Travelers Should Check out Revamped Priceline.com.
Star Trek (2009).
- Imdb.com: Leonard Nimoy.
Travel Writer Web Site.
Travel Web Site.
ShatWatch: Raw Nerve Nimoy Clip & Pics + Shatner Talks Kirk Fight Moves.
- The Los Angeles Times:
William Shatner on comics, fame and missing the 'Star Trek' movie.
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