Priceline.com (Nasdaq: PCLN), which some investors would argue was the poster child for the internet bubble at the beginning of the decade and then was written off for dead by many, has roared back with a vengeance over the last few years.
IN PICTURES: How To Make Your First $1 Million
Priceline.com just reported third-quarter earnings that beat guidance and raised its outlook for the next quarter. The company earned $3.45 per share in the quarter after removing a $181.9 million non-cash tax benefit that boosted earnings, beating consensus estimates of $2.92 per share.
Priceline.com is now up more than 150% year to date on the back of strong earnings momentum. The company has reported an upside earnings surprise for each of the last four quarters. It has seen its earnings estimates for 2010 move up over the last 90 days from $8.56 to $9.19 per share. This was before the blowout quarter reported November 9, so the 2010 estimates are sure to be moved up as analysts adjust for the higher business activity guided to by the company. (Find out more about earnings surprises in Surprising Earnings Results.)
A Controversial Company
Priceline.com has always been a controversial stock, as skeptics questioned the extendability of its original business model, which called for travelers to bid for the idle inventory of airlines with a range of travel dates rather than a specific flight. Skeptics claimed that most travelers needed the certainty of a set travel date, and thus the addressable market would be limited.
The company has expanded beyond this, and it now earns revenue from what its calls "price disclosed" products including hotel rooms, airline tickets, cruises and other services. The company owns booking.com, a large European hotel reservation service. Ironically, booking.com maintains a network of 26 physical locations worldwide, so it appears that brick-and-mortar businesses haven't died just yet.
Although current investors in Priceline.com are no doubt ecstatic about the recent performance, those who bought back in 1999 still have a long way to go. The stock had a peak market capitalization of $22 billion in May 1999 during a quarter when revenues were reported at $49.4 million. The current market capitalization is around $8.5 billion.
In 2003, the stock price dipped so low that the company did a one-for-six reverse split to boost its share price.
Others Still Trading Far Below Peak Prices
Many other stocks that rode the technology and internet bubble back then are still trading far below its peak prices. This includes large cap stocks like Microsoft (Nasdaq: MSFT) and Cisco Systems (Nasdaq: CSCO), which are still considerably below those levels.
Amazon.com (Nasdaq: AMZN) is one of the few that has exceeded its technology bubble highs. The stock broke through after it reported strong earnings last month.
If anything, this proves the importance of examining valuation when analyzing a stock. Priceline.com currently trades at 22 times its 2010 earnings estimates.
Priceline.com does not operate in a vacuum, and the company does have competition. Expedia (Nasdaq: EXPE) and Orbitz Worldwide (NYSE: OWW) provide similar services in some areas.
Another competitor is Sabre Holdings, which owns travelocity.com. Sabre Holdings was taken private by two private equity firms in 2007, so look for an IPO issue in the near future.
Priceline.com encountered the brutal weeding process that the market imposed on many of its peers back in the early part of this decade. The company has not only survived that hazing, but also prospered and rewarded recent investors with powerful earnings growth.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
Mutual Funds & ETFsLearn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
Investing NewsWill Ferrari's shares move fast off the line only to sputter later?
Stock AnalysisHere are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
InvestingThe further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
Fundamental AnalysisOptions market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
Stock AnalysisCan these two oil stocks buck the trend?
Investing NewsAlcoa plans to split into two companies. Is this a bullish catalyst for investors?
Stock AnalysisIf you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
Investing NewsA rate hike would certainly alter the investment scene, but would it be for the better or worse?
Investing NewsWith market volatility high, you may think it is time to run for corporate bonds instead of stocks. Before you do take a deeper look into which is better.
When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>