NEW YORK • Priceline.com came close Friday to becoming the first stock in the Standard & Poor’s 500 index to cross $1,000.
Investors jumped onboard after the travel booking company reported better than expected second-quarter earnings. The stock rose to almost $995 before leveling off. The stock closed at $969.89.
The company’s stock hasn’t been this high since it had an adjusted closing price of $974.27 on April 30, 1999, a month after going public in the heady days of the dotcom boom. The stock dropped below $10 just two years later.
Online travel sites like Priceline, Expedia and Orbitz have their roots in booking airline tickets, but have branched out because of a decline in commissions the airlines pay them. Priceline has been the most aggressive and successful in diversifying through several company-owned sites including Booking.com, Agoda, and Rentalcars.com.
Priceline got its start asking travelers to "Name Your Own Price" and bid on flights, hotel rooms and car rentals. Bidders didn’t know in advance what hotel or flight they would be on, and the booking was non-refundable, but the savviest could save substantially as travel providers tried to fill unused rooms, cars or seats on planes. The company hired William Shatner as its pitchman, calling him "the negotiator." Priceline still offers its bidding service but has mostly shifted to more traditional bookings and travel packages.
The key to its success in the last quarter was overseas hotel markets. Domestic bookings grew at a respectable 12 percent in the second quarter, but international growth was red-hot, up 44 percent from last year.
The number of hotels that list their properties on the booking sites is growing. Booking.com now has 330,000 hotel properties, up from 295,000 reported last quarter, many of them added in Europe and Asia. The Norwalk, Conn. company is paid a commission for each room sold.
The company also spent heavily on advertising, increasing its online budget by 47 percent.
Profit in the April-to-June quarter rose 24 percent to $437.3 million, or $8.39 per share, compared with the same quarter a year ago. Excluding one-time items such as acquisition costs and expenses related to paying employees with stock, earnings came to $9.70 per share.
Revenue rose 27 percent, to $1.68 billion, from $1.33 billion.
Analysts, on average, were expecting profit of $9.38 per share on revenue of $1.65 billion, according to FactSet.
In May, Priceline completed the purchase of search and booking site Kayak for in a $1.8 billion in cash and stock. Analysts predict that deal will eventually help drive more travelers to its other sites to make bookings.
"We believe that Priceline’s market share gains will continue given its best-in-class hotel inventory, while the likely deployment of Kayak in more international geographies should open further avenues for growth over the next 12-18 months," Cantor Fitzgerald analysts Naved Khan, Youssef Squali and Kip Paulson wrote in a note to investors late Thursday.
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