With Priceline's (NASDAQ:PCLN) stock gaining over 150% (from
~$190 in May 2010 to ~$500 in May 2011) over the last year and a
staggering 1,800% (from $23 in Jan 2006) over the last 5 years,
Priceline has been recognized as the single best performing stock
in S&P 500 over the past five years. However the stock of the
leading online travel agency, after Expedia (
) doesn't come without its fair share of risks.
Here we take a closer look at the potential upside and downside
to our current
$506 Trefis price estimate of Priceline's stock
caused by unexpected fluctuations in hotel room bookings, which
make up over 91% of its stock.
4% Upside: $526 Trefis Price estimate for Priceline
Priceline's share of occupied hotel rooms (+4%)
We currently forecast Priceline's share of occupied hotel rooms
to grow 2.13% in 2010 to 3% by the end of our forecast period.
However, Priceline recently announced a partnership with Delta
Airlines wherein members of Delta's SkyMiles Frequent Flyer Program
can earn SkyMiles whenever they book hotels through Agoda.com,
Priceline's popular hotel booking site in Asia. The resulting 0.12%
incremental market share could lead to a 4% potential upside to
Trefis price estimate of Priceline's stock.
6% Downside: $476 Trefis Price estimate for Priceline's
Priceline's share of occupied hotel rooms (-6%)
Priceline's biggest competitor and the world leading online
travel agency, Expedia has recently struck partnerships with South
African Airlines. See
After AirAsia, Expedia Now Partners With South
It also entered into a joint venture with the leading low cost
carrier in Asia, AirAsia. See
Evaluating Expedia's Upside from AirAsia Partnership
. These and similar partnerships with airlines would help Expedia
strengthen its share of hotel bookings outside US, which could
severely hinder Priceline's growth prospects that essentially
depend on hotel bookings' market share gains outside US in Asia and
We can reasonably expect Expedia's and other travel agencies'
private-label partnerships with airlines to cause Priceline's share
to be limited to 2.75% by the end of our forecast period leading to
a 6% potential downside to our Trefis price estimate of Priceline's
View our detailed analysis for Priceline