There were some headwinds in the second quarter — net income was $71.5 million, or diluted EPS of $0.51, a decline of 68% from $105.2 million, or $0.76 per diluted share, reported in second quarter of 2012. For the six months ended June 30, Expedia posted a loss of $32.7 million, versus last year’s net income of $101.96 million. Some good news for current stockholders – the cash dividend to be paid in September was raised to $0.15 a share.
Tripadvisor Inc (NASDAQ:TRIP) expects a bumpy third quarter with new business model
While Priceline.com Inc (NASDAQ:PCLN) and Expedia are known for their discounted pricing, Tripadvisor Inc (NASDAQ:TRIP)’s focus is helping travelers find the right hotel/flight at the right price. It makes money when users click away to a travel partner’s site to book a room or flight. The company’s net income for the second quarter was $66.98 million, an increase of 7.5% from last year’s $53 million. GAAP net income per diluted share was $0.46 in the current quarter, up 24% from $0.37 reported in 2012.
In June, the company launched its new metasearch feature. It provides real-time hotel and flight pricing and availability on the TripAdvisor site, eliminating the need for users to click away to obtain this information. As users click away less from the site, the fees TripAdvisor collects for referring traffic will decrease. The company is counting on its new business model increasing revenue with higher listing fees and providing higher conversion (booking) rates for its travel vendors.
My foolish conclusion
Despite its steep price tag, Priceline shares have a PEG ratio of 1.11 and trade at 19 times 2014 earnings. Next year’s average EPS is estimated to increase to $49.30 from 2013’s EPS of $40.23. Earnings are expected to hold steady with a quarterly earnings growth rate year-over-year of 24% and a projected five-year growth rate of 21%. Thomson/First Call analysts regard the stock a “buy” and forecast a share price range between $900 to $1,200, signaling that interested investors should considering buying shares now.
Expedia has a more modest projected five-year growth rate of 11% and is valued at 14 times 2014 earnings. Its lower share price also makes it a more accessible investment choice than Priceline.com. TripAdvisor may need a few quarters to show if their new business model will increase future earnings.
The article Is Priceline Going Where No Stock Has Gone Before? originally appeared on Fool.com and is written by Eileen Rojas.
Eileen Rojas has no position in any stocks mentioned. The Motley Fool recommends Priceline.com and TripAdvisor. The Motley Fool owns shares of Priceline.com and TripAdvisor.
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