Priceline.com Inc (NASDAQ:PCLN) operates as an online travel company. Priceline is also one of few survivors from the dot.com good old days. As opposed to most of the other dot.com companies that disappeared from the face of the universe when the dot.com bubble popped, Priceline is still alive and has a vibrant business. The company is considered the largest U.S. online travel agent by market value.
Priceline.com Inc (NASDAQ:PCLN)’s fundamentals are solid, with the company demonstrating robust revenue growth, decent debt levels, impressive earning growth and expanding profit margins. The company’s valuations are certainly expensive, as its stock has recently hit a new all-time high. Having said that, I think that the company is a solid buy given its potential to penetrate into lucrative international markets as the investment will certainly pay off in the near future.
Acquisition of Kayak Software
Last year, Priceline.com Inc (NASDAQ:PCLN) announced that it agreed to acquire the travel search engine Kayak Software Corp (NASDAQ:KYAK) for $1.8 billion in a stock and cash deal (the two companies recently agreed to set a date for their merger). Kayak assists customers in comparing prices for booking flights, hotels, car rentals and related package deals.
Priceline’s initial intention was to keep the Kayak name and website independent and to profit from the partnership by expanding internationally. For Priceline.com Inc (NASDAQ:PCLN) this was not a rare acquisition, as the company had already acquired similar companies such as Agoda.com, Booking.com, and Active Hotels. The acquisitions give the company access to travelers in Asia and other markets worldwide. Furthermore, the true reason behind the purchase of Kayak lies in an effort to compete against the dominance of Google (NASDAQ:GOOG) in travel searches and to expand Priceline’s advertising platform.
International booking & mobile platform
International bookings at Priceline.com Inc (NASDAQ:PCLN) climbed 40% to $7 billion in the past quarter, accounting for 85% of total bookings. Both the company and the industry as a whole are operating in a world of uncertainty and a risky macro environment. Europe is viewed as the future growth driver for the company, though the financial crisis in Europe hit an already shaky industry and forced potential travelers to stay home.
Priceline is considered highly innovative and is often an early adopter of new technology. The company has already heavily invested in advancing its mobile platform as an increasing number of consumers are using mobile devices. The mobile platform offers great growth potential for travel services, especially for last minute travelers.
Competition
Expedia Inc (NASDAQ:EXPE) is one of Priceline’s most important rivals. Expedia is leading the U.S market with 43% market share as opposed to Priceline’s 15%. Priceline, on the other hand, is more internationally-focused than Expedia and is overtaking Expedia in the global arena. Attempting to combat this, Expedia acquired Trivago in 2012, which is one of the leading meta-search engines for hotel bookings in Europe.
According to Bloomberg, Priceline.com Inc (NASDAQ:PCLN) boosted its annual ad spending to more than $1 billion for the first time, extending its lead over Expedia in the hotel-booking market and stepping up a rivalry that’s benefiting Google. Google is basically the real winner here as Priceline, fueled by its Amsterdam-based Booking.com unit, has more than tripled spending on Google. Moreover, about 90% of the company’s $1 billion advertising budget was spent through Google.
The results found when searching on Google for the word “hotel” and/or “accommodation” plus any major city or tourist destination reveal the extent of Priceline.com Inc (NASDAQ:PCLN)’s investments in search-engine marketing. Additionally, Priceline’s Booking.com is the first paid result if that search included of the largest cities in the world. Not only is Google attracting more spending from online travel agents, but it is also becoming a bigger competitor. In 2011, Google introduced its Hotel Finder service, letting users search for accommodations on Google and in most cases bypassing other web providers.
Also of note is Orbitz Worldwide, Inc. (NYSE:OWW), which is another leading global online travel company. Orbitz uses innovative technology that enables leisure and business travelers to research, plan and book a broad range of travel products. One of the smaller players in the online travel industry, the company is benefiting from a partnership with American Express Travel. Long-struggling Orbitz recently reported its first profit since 2007, which is significant since the company has lagged behind the entire industry for years. That said, there is only a slim chance that Orbitz will threaten Priceline and/or Expedia in the foreseeable future.
The foolish bottom line
Being one of the few survivors from the dot.com era does not go without saying. As a matter of fact, I fully believe that it provides strong signs of investor confidence in the company. Priceline.com Inc (NASDAQ:PCLN) is a leader in a $100 billion industry, and it keeps growing year after year at a fast pace. Priceline’s ability to effectively penetrate into international markets such as Europe and Asia Pacific can potentially make the company a true winner and a worldwide leader in the online travel field.
The article This Dot.com Survivor Is a True Winner originally appeared on Fool.com and is written byYaniv Hirsch.
Yaniv 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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