* Priceline stock rise toward $1,000
* Orbitz stock up 36 percent
* Hotels, rental cars, vacation packages help
By Karen Jacobs
Aug 8 Online travel agencies Priceline.com
and Orbitz Worldwide Inc posted
higher-than-expected quarterly profits on Thursday, pointing to
solid demand for travel.
Rising reservations for rental cars and hotels bolstered
Priceline, which has the highest market capitalization among
online travel agencies, while Orbitz benefited from an increase
in bookings of higher-margin hotel and vacation packages.
"The travel space is doing well, pretty much across the
board," said Edward Woo, a research analyst with Ascendiant
Capital Markets. "People are traveling, spending money and these
companies are benefiting."
Shares of Orbitz jumped more than 36 percent to a new year's
high of $12.62. Priceline, which reported results after markets
closed, gained more than 5 percent to $984.50 in extended
The online travel industry has rebounded after a depressed
few years, as cash conscious buyers seek out bargains and the
U.S. economy has stabilized. But the online travel segment has
shown signs of becoming more competitive.
Two weeks ago, Expedia Inc posted profit that fell
short of estimates because of competition and poor performance
with its Hotwire.com discount site.
But Woo said the Expedia results likely reflected
company-specific issues. "It's likely that the travel market is
healthy for most players right now ... and Priceline has
tremendous momentum," Woo added.
Both Orbitz and Priceline are expected to ride that momentum
into the rest of the year.
Orbitz raised its 2013 revenue view and said strength in its
hotel business was continuing into the current quarter
"There's still so much opportunity in this market" as
consumers increasingly book travel on mobile devices, said
Orbitz Chief Executive Barney Harford in an interview. "We
continue to invest very aggressively in this area to take
advantage of this transformational shift."
Priceline said profit for the current third quarter could
exceed analysts' estimates, and forecast $15.30 to $16.30 a
share for the period. Analysts are expecting $15.86 a share.
Priceline owes much of its success to international bookings
on its Booking.com travel site, which has a relatively high
concentration in Europe. It is now investing in TV advertising
in the United States to increase awareness of Booking.com, its
biggest brand. It also recently acquired meta-search site
operator Kayak Software to increase traffic.
"The advertising campaign is having a positive effect on the
growth that Booking.com is experiencing in the United States,"
Priceline Chief Executive Jeffery Boyd said in an interview.
"The most differentiated feature about this market is how
highly competitive it is."
Priceline has boosted earnings and revenue for the past five
years, outperforming Expedia and Orbitz. Its shares have gained
51 percent this year, and on Thursday closed at $933.75 on
Nasdaq. Some analysts speculate that the shares will cross
$1,000 soon, which would be a first for an Standard & Poor's 500
Even at its current level, Priceline's stock is still shy of
its all-time high. Adjusted for a 1-for-6 reverse split 10 years
ago, the price reached $990 in April 1999 before falling to a
low of around $6 in October 2002.
"Just because the stock price is absolutely higher than what
we see from most other stocks in the market, it doesn't mean
that the stock is more expensive," said Scott Kessler, an
analyst with S&P Capital IQ. He said Priceline is trading at
roughly 25 to 30 times his firm's estimate for 2013 earnings.
Boyd, Priceline's CEO, said stock splits have been
considered by the company's board from time to time but haven't
been seen as a move that would bring major shareholder benefit.
"That's not to say we would never do one," Boyd said.
Net income at Priceline was $437.4 million, or $8.39 a
diluted share, in the second quarter, up from $352.3 million, or
$6.88 a share, a year earlier.
Adjusted for one-time items, profit was $9.70 a share, more
than the $9.36 average estimate by analysts polled by Thomson
Gross bookings, or the value of travel services customers
bought, rose 38 percent to $10.1 billion in the second quarter.
Quarterly revenue at Priceline grew about 27 percent to
$1.68 billion. Hotel room nights booked increased 38 percent,
while rental car days booked rose 46 percent.