Everyone loves a good deal on travel. But today, would-be travelers are nearly inundated with “great deals” on flights, hotels, and rental cars. So, do these heavily advertised claims really add up to higher share value for stockholders? For Priceline.com Inc (NASDAQ:PCLN), the answer would appear to be a resounding “Yes!”
The real Priceline negotiations at work
Priceline.com, the heavily advertised discount-travel website, provides hotel reservation services worldwide for roughly 275,000 properties located in 175 different countries and territories around the globe. The company also operates under the Agoda.com and Booking.com brand names.
In addition, the Priceline also provides reservation services for airline tickets, cruises, rental cars, and total vacation packages. Since 1997, this company has made it its business to provide the best available price on the services that it offers – even going to a “negotiation” strategy termed “name your price,” where website visitors can essentially “bid” on the price they are willing to pay for hotel rooms.
Priceline’s strengths can be seen in a number of areas, including impressive earnings per share growth along with its consistent growth in net income and revenue. In addition, the company continues to maintain a solid financial position with reasonable debt levels.
Are other travel websites being left in the dust?
While Priceline.com Inc (NASDAQ:PCLN) has enjoyed a great deal of success, its competitors are by no means being left in the dust. Expedia Inc (NASDAQ:EXPE), for instance, closed out its fiscal year 2012 with 17% higher revenue over the prior fiscal year. In fact, despite the weak economy, Expedia marked 24% overall growth in its fourth-quarter 2012 earnings.
A great deal of Expedia’s revenue growth for 2012 is being attributed to the company’s expanding international presence, as well as its substantial growth in hotel bookings. In addition, Expedia has also put a big push on expanding its mobile platform – a good move, as mobile devices have become a preferred way for numerous consumers to access the Internet.
Although Expedia Inc (NASDAQ:EXPE) seems a bit wary of its increasing competition – both in domestic and international markets – which has now become more apparent after recent 1Q quarter results – the company is still expected to continue posting high double-digit growth figures over the coming quarters.
Likewise, Orbitz Worldwide, Inc. (NYSE:OWW), another household name in online travel bookings, has seen nearly phenomenal growth recently, with a stock price that is up by approximately 115% year-to-date. One catalyst for this is likely the company’s positive fourth-quarter 2012 earnings report.
In late 2012 Orbitz inked a deal with American Express Company (NYSE:AXP) that is expected to provide additional incremental revenue in 2013 and beyond. Through this travel network partnership, Orbitz will provide customers of American Express with access to power-vacation packages. In the fourth quarter of 2012 alone, this deal accounted for a substantial portion of Orbitz Worldwide, Inc. (NYSE:OWW)’s total hotel bookings.
While some analysts are leery about the upward movement in the company’s share price, investors may still want to take a chance on this one – especially if they can pick up the stock at a price of $5 per share or below.
Similar to Priceline.com Inc (NASDAQ:PCLN), both Orbitz Worldwide, Inc. (NYSE:OWW) and Expedia Inc (NASDAQ:EXPE) are continuing to take advantage of potentially higher international revenue, as well as continued acceleration in hotel bookings overall. The emerging economies – as well as Europe – are offering substantially large growth opportunities for travel agencies.
Likewise, as these online-travel powerhouses continue to make their services available to consumers’ mobile devices, it is likely that they will also see an upward spike in bookings across the board.
Priceline plans to report its first-quarter 2013 earnings on May 9. Analysts expect Priceline to report a 23% year-over-year increase in sales, backed by strong travel demand in North America and its growing presence in emerging markets.
Priceline’s success can be evaluated by its strong revenue trend in the last five years. Its revenue has grown from around $1.4 billion in 2007 to more than $5.2 billion in 2012, an impressive steep-looking CAGR of more than 30%.
Analysts expect that the company still has more growth opportunities in Europe. One approach Priceline.com Inc (NASDAQ:PCLN) has taken in this regard is to grow its business through acquisitions in the key European markets. For instance, since the acquisition of Bookings.com, Priceline has seen a steady increase in its market share and revenue generated from Europe.
As growth in the North American travel market starts to slowdown, online-travel agencies are looking to other promising regions, such as Europe and Asia, for their growth opportunities. By reading the market trends early, Priceline has successfully expanded its presence in regions that hold the key to its future earnings growth.
The bottom line
While Priceline.com Inc (NASDAQ:PCLN) does not currently pay a dividend to its investors – and the company’s shares are already hovering near their 52-week high – analysts expect future percentage growth in the share price over the next 12 months in the high double-digit range. Not a bad payoff for shareholders – especially if they can use their earnings to book a discounted vacation.
The article Are Priceline’s Shares Headed Higher? originally appeared on Fool.com.
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