Near All-Time High, Priceline.com Inc (PCLN) Can Continue to Rally

PCLN Operating Margin TTM data by YCharts

More on Expedia and Orbitz

After Priceline, Expedia is my next favorite name in the space. Currently, as shown by the chart below, Expedia is trading at historically high valuations. That being said, the valuation does not seem excessive when compared to Priceline. Like Priceline, Expedia also has a lot of cash on its balance sheet, currently more than $2 billion or $15.46 per share.

EXPE Forward PE Ratio data by YCharts

Orbitz is my least favorite name in the industry. Orbitz currently trades at 26 times forward earnings, more than both Priceline and Expedia. Orbitz has also proved the weakest company of the three as it has repeatedly swung from money-losing quarters to money-making quarters. Both Priceline and Expedia have been solidly profitable. I would not, however, bet against Orbitz or sell it short because I think the company is a possible takeover target. The online travel industry has seen many deals over the past few years and I would not be surprised to see Orbitz taken over at some point.

Conclusion

Despite Priceline’s remarkable run over the past decade, there are reasons why the stock can continue to rally. The reasonable valuation relative to historic norms, high short interest, and potential use of cash are all reasons why Priceline can continue to rally. After Priceline, my next favorite name in the industry is Expedia.

The article Near Its All-Time High, Priceline Can Continue to Rally originally appeared on Fool.com and is written by Sammy Pollack.

Sammy is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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