There is no question that Priceline.com Inc (NASDAQ:PCLN) is a success story. Offering hotel reservations in 99 countries in 41 different languages, plus flights, rental cars, cruises, and entire vacation packages, Priceline has done incredibly well. As a result, its shareholders have prospered. I wonder if any of my readers remember the news stories after the .com crash of the early 2000’s in which William Shatner expressed his outrage and regret over being paid primarily in Priceline stock.
Fast forward a decade or so, and those who bought Priceline after the crash did better than those who bought Apple at its lows. After hitting its all-time low of $6.30 in 2002, the stock has flourished since, recently trading around $700 for a gain of 11,000%! As for Mr. Shatner, the exact amount of Priceline stock he received is a mystery, the figure of $600 million seems to be mentioned a lot. Not bad for being a spokesperson!
My general concern is whether or not Priceline still has room to grow. The company has certainly experienced rapid revenue growth over the past 10 years (see chart below). At a market cap of over $34 billion, how big could this thing get? Is it still a growth story? We’ll get a better idea of how the company is growing when it reports its 2012 results on Feb. 25, but for now let’s see what the company has planned.
Priceline has grown into a truly international company, operating under the booking.com and Agoda brands outside of the United States, and earning 82% of its income overseas (mostly in Europe). Priceline began primarily with its “Name Your Own Price” offerings, and began offering retail products in 2003, which as the chart below will tell you, that’s when revenues really began to take off.
Priceline’s general strategy includes becoming the number one travel website by improving functionality, pricing, and content, and maximizing its cross-selling opportunities, such as selling a rental car to purchasers of airline tickets. Since the company has successfully entered the European market, Priceline is hoping to replicate its European success in its next frontier: Asia. Having purchased Agoda, an Asian hotel-booking site, in 2007 and Priceline’s recently announced alliance with CTrip, a Chinese travel service provider; it plans to do just that.
One move that should do wonders for Priceline’s domination is its recently announced deal to purchase Kayak Software Corp (NASDAQ:KYAK) for $1.8 billion. Kayak is well-known for enabling travelers to compare pricing information from dozens of travel sites at once, like a search engine for travelers.