Priceline Incorporated (NASDAQ:PCLN) has killed the competition since inception and its chart is a thing of beauty despite the recession and a crowded market place. Looking back in the last 12 months Priceline (PCLN) shares have increased 117% while rivals Expedia, Inc. (NASDAQ:EXPE) have dropped 4.3% and Orbitz Worldwide Inc (NASDAQ:OWW) has tanked 42%. Priceline is the clear choice for shareholders when it comes to return on investment within the online travel sector. However there is anomaly when it comes to comparing the online travel companies, Travelzoo Inc. (NASDAQ:TZOO) shares have jumped 180% during the past six months.
Priceline has made William Shatner a rich man, in the last five years the stock has ran up 1,984% and the company now commands an impressive $22.45 billion market cap. Last year it was reported that Shatner has around 2 million shares of Priceline, that number was not confirmed by the company or “The Price Negotiator” himself, but I’m sure its a ton. Travelzoo may have beat Priceline’s return in the last 12 months, but stretch the time frame out five years and Travelzoo has increased 147%, not the nearly 2,000% Priceline climb.
However there may be even more karate-chopping fun in store for Shanter and Priceline. The company is forecasting total gross travel bookings to jump year-over-year by 36 to 41%, and the best part– most of the growth will come from international sales. Forget relying on cash strapped Americans, Priceline expects international bookings to increase by 54 to 59%. Back in the U.S., Priceline is only counting on a domestic gross travel of 5 to 10%. Priceline expects annual revenue to increase 31 to 36% and gross profits are expected to reach 49 to 54%. There’s a reason why Priceline has become “the Negotiator” of the online travel segment, they hit their numbers out of the park and they reached a deal with American Airlines (AMR).
THE AMERICAN AIRLINES PINCH
Last month, American Airlines and Priceline struck a deal, in the “near future” consumers will be able to buy American flights on Priceline.com. That deal does not exist for Expedia and Orbitz and there has been no word on if they will ever carry American airline flights again. Its a big blow to Expedia and Orbitz, and investors are wondering how long until other airlines follow suit. Priceline is willing to play ball with American, that sends a distinct message in contrast to Expedia charging that American Airlines’ new commercial strategy is “anti-consumer” and “anti-choice.”
For the average online travel consumer, do we really notice a difference between these companies websites? How many travel websites do you know or can you remember by the time you actually book your vacation or business trip? Do you even know what one travel website may do better than the next? At this point, do you really care?
No, we want instant gratification and to feel good about the price we paid.
If you need flight, book a car rental or find a hotel, the masses head to Priceline.com, Expedia.com, or Orbitz.com — but what is Travelzoo.com more like Travel Who?
TRAVELZOO 101
Priceline.com may be the leader but you can’t ignore Tavelzoo.com and its 293% return over the past 12 months, part of the reason is they now have 22 million subscribers all over the world. That’s all thanks to its “Groupon.com” approach of emailing its subscribers a “Daily Deal”. Forget 12 months, in the last six months Travelzoo’s stock and market cap has increased 180% thanks to its new business model. As BusinessInsider.com put it last month:
Travelzoo’s core travel business was valued at $250 million back in August before they launched their daily deal segment. Speaking with several Wall Street analysts, their core travel deal business is now valued between $250 million and $350 million.
Since their market cap is now at $750 million and taking into account the $35 million of cash on their balance sheet, Wall Street is implying a $360 million to $460 million valuation for their new daily deal business.
Not bad for four months of work.
Travelzoo shares have cooled down since Feb 2nd, they are no longer over $50 a share and have backed down 15%. During the same time frame Priceline managed to add another 4.7% and yesterday they hit a new 52-week high of $464.67.
Priceline.com is winning the online travel space hand over fist while up-and-coming Travelzoo shows potential but has moved up very quickly in the past few months. Priceline has shown they can “negotiate” with American Airlines, the same cannot be said about Expedia or Orbitz. Wall Street cares about growth, and Priceline has proved itself, thus its shares sound expensive at today’s price of $459 but they have demonstrated “you get what you pay for”. Travelzoo could get stuck labeled a “momentum” stock if they don’t deliver on their numbers and provide a respectable guidance.
Bottom line: Priceline.com is the leader in online travel worldwide, its share price is justified. Travelzoo shares have flown to the sky in a hurry and it could be a bumpy ride.
Frank Lara Jr
The author holds no positions in any of the securities mentioned in this publication
| One Chart for Priceline, Expedia, Orbitz, and Travelzoo: |
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