December 7, 2013
When markets speak
Priceline.com came close to becoming the first stock in the Standard & Poor's 500 index to ever cross $1,000.
Investors jumped onboard after the travel booking company reported better than expected second-quarter earnings (1). The stock rose to almost $995 before levelling off (2). The stock closed at $969.89.
The company's stock hadn'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 days of the dotcom boom (3). 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 they have branched out (4) 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 (5) 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 (6) could save substantially as travel providers tried to fill unused rooms, cars or seats on planes.
The company hired “Star Trek” star 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 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 company is paid a commission for each room sold.
Analysts, on average, were expecting profit of $9.38 per share on revenue of $1.65 billion, according to FactSet.
Adapted from an article by Scott Mayerowitz, AP Business Writer
“Earnings” can refer to the money a person makes from the work that they do or the profit that a company makes. In this case, the earnings correspond to the second quarter (or Q2, in newspaper and financial shorthand) – the fourth, fifth and sixth month of the financial year.
(2) Level off
If a rate or amount levels off, it stops rising or falling and stays at the same level.
“Dotcoms” are companies that do most of their business on the Internet. The name comes from the “.com” at the end of their URLs (Internet addresses). The dotcom boom (or bubble) is the short-lived explosion of the value of Internet companies at the turn of the 21st century.
(4) Branch out
When a company branches out, it starts a new business that is different from their usual or original activity. This comes from the branches of a tree, which grow in new directions from the main trunk.
To bid is to compete to buy something by offering a certain amount of money. If you are bidding to buy something, then your price should be the highest – but companies often bid to gain a project, trying to undercut their competitors.
A savvy person has practical knowledge of something – not “book smarts” or lots of theory, but the kind of understanding you get from experience.