Priceline Faces Tough Times Ahead
By Jennifer Laidlaw
NEW YORK (Reuters) - Online travel services company Priceline.com Inc. (Nasdaq:PCLN - news), one of the first dot-coms to deliver on a promise of profitability, could be in for a rough ride as last week's jetliner attacks on New York and the Pentagon (news - web sites) take their toll on the travel industry, analysts said.
In what has been seen as a sign of support for the company, the company's chief executive said on Friday he would buy shares in Priceline instead of selling them. Two of its major shareholders, companies controlled by Hong Kong's richest man, also said they were no longer seeking approval to sell their shares and could increase their holdings.
Analysts say the name-your-own price Internet firm faces an uncertain business climate in the months ahead, as travel firms and airlines grapple with a public nervous about traveling by plane, analysts say.
The company's shares were down 3 cents, or 1.31 percent, at $2.26 in Friday afternoon trading.
In the last year, Priceline's shares have fallen 90 percent, underperforming the Nasdaq stock market, which is down 64 percent on the year.
``Clearly they are going to be impacted by all the airline layoffs and flight cancellations,'' said Michael Legg, analyst at Jefferies & Company.
``When all the dust settles we don't know what is going to happen to Priceline,'' he said. ``The travel industry has imploded, and we are focused on a company that is in an out of favor industry.''
The Internet company, known by many for advertisements featuring Star Trek's William Shatner, has had a rough ride, but seemed to have succeeded in digging itself out of a hole after embarking on a major restructuring last year.
In late July, Priceline, which has been in a turnaround mode since late 2000, became part of an elite group of dot-coms that had achieved profitability.
However, in the wake of Tuesday's tragedy, it warned that its third-quarter revenues would be lower than expected. Priceline said its bookings on Sept. 17 were 40 percent lower than they were on Sept. 10, the day before the tragedy, and its Sept. 18 bookings were 35 percent lower than those of Sept. 10.
In what was seen as a show of support for Priceline, the company said on Friday that its chairman and chief executive, Richard Braddock, had canceled plans to sell shares of the company and would instead use stock options to purchase an additional 750,000 shares.
On Thursday, Priceline said that two companies controlled by Hong Kong's richest man, Li Ka-shing, were no longer seeking approval to sell shares in online travel auction company and could increase their holdings to 37.5 percent.
The tycoon's Cheung Kong (Holdings) Ltd. and Hutchison Whampoa Ltd. withdrew their request for a shelf registration that would have entitled them to sell Priceline shares.
Analysts say, however, it's not just Priceline, which is getting hit. The whole travel services sector -- both online and offline -- is suffering, and Priceline's performance will depend very much on the industry's direction. The travel industry was already hurting from slower economic growth before the Sept. 11 attacks took place.
Other popular online travel firms like Expedia Inc. (Nasdaq:EXPE - news) and Travelocity.com Inc. (Nasdaq:TVLY - news) have both reported a steep fall in their bookings.
``The question is what are the prospects in the online travel business?'' said Jake Fuller, analyst at Thomas Weisel Partners. ``The near-term prospects are not that good. The question is how quickly do business levels ramp up to normal. That's going to take some time.''
Analysts believe, however, the company has the ability to make it through the current downturn.
``The company has a very strong balance sheet and has survived a major crisis before, although it was one largely of its own making,'' said Thomas Underwood, analyst at Legg Mason.
``Priceline could be profitable next year even running at levels of 70 percent of what they were in the first half of this year.'' |
