*** PCLN ($21-$25-$22) gives upbeat Q1 bookings
By Bambi Francisco, CBS.MarketWatch.com
Last Update: 6:20 PM ET Feb. 10, 2004
Priceline.com shares (PCLN: news, chart, profile) rose 7 percent to $23 in after hours markets on the news.
Priceline.com said that gross travel bookings would grow 25 to 30 percent in the first quarter. Thomas Weisel Partners expected gross bookings to grow 6.8 percent. J.P. Morgan forecast gross travel bookings to grow 19 percent.
"What we've seen is a nice turnaround in total airline ticket sales," said Jeffrey Boyd, Priceline.com's president and CEO, in an interview. "With the new retail product offering, we're selling a lot more retail tickets."
Priceline has historically sold opaque tickets. Those are airline tickets that allow customers to name their own price. But retail tickets have become more popular among consumers in the last several years as airlines have offered steep discounts. Additionally, airlines have been reducing the inventory they've set aside for opaque tickets.
By selling both retail tickets and name-your-own price tickets, Priceline is giving consumers an option and appears to be attracting customers with this strategy.
According to Boyd, Priceline was losing market share to InterActiveCorp's (IACI: news, chart, profile) Expedia and Orbitz (ORBZ: news, chart, profile) last year. But with its retail airline ticket offering, Priceline expects to grow airline ticket unit bookings at the same rate as the industry. Priceline expects to grow airline ticket bookings by 10 to 15 percent in the first quarter.
At the same time Priceline gave its outlook, the company said that it earned $2.2 million, or 6 cents per share, in the final quarter of last year. This compares to a loss of $7.4 million, or 20 cents per share, in the same quarter a year ago, and tops the 4 cents consensus expectation.
The online travel agent said that quarterly revenue fell 9 percent to $180 million, down from $197 million in the comparable period a year ago. Analysts expected Priceline.com to generate $186 million.
Priceline's declining revenue reflects a greater portion of retail airline tickets sold and fewer opaque tickets. The price of a retail ticket is not reflected in the revenue line, said Boyd. Only the fee for the ticket sale is recorded in the revenue line whereas the entire ticket price for opaque tickets are included in the revenue line.
To this end, Priceline is encouraging analysts to look at gross travel bookings as a true measure of its growth rate.
While retail tickets may be more popular, Priceline does receive a lower fee for selling retail tickets as opposed to opaque tickets. But Boyd said that Priceline is selling enough volume of retail tickets to offset the decline in opaque ticket sales.
Asked whether the company planned on increasing marketing and advertising this year to compete, Boyd said that Priceline would spend roughly $13 million to $15 million in advertising in the first quarter. He said he expects quarterly spending on marketing and advertising to decline from the first-quarter level.
For the first quarter, Priceline.com said that it expected to earn 6 cents to 10 cents per share. It also expected quarterly sales to be "roughly equal" to first-quarter revenue last year. In that period, Priceline generated revenue of $197 million. Analysts expected Priceline to earn 7 cents a share on revenue of $204 million.
Meanwhile, Orbitz rose 80 cents to $24.70.
The online travel agency also reported quarterly results after the close. Orbitz said it lost $14.6 million, or 40 cents per share, in the fourth quarter. This compares to a profit of $3.8 million, or 10 cents per share, in the year-ago period. The company also posted revenue of $69.7 million, up 35 percent from $69.7 million in the year-ago period.
Bambi Francisco is Internet editor |
