Priceline Warns of Lower 3Q Revenue
Sept. 27 -- Priceline.com warned today that third-quarter revenue would fall short of analysts’ expectations, sending its shares plunging.
Priceline fell $8.14 to $10.50 — a 43 percent drop — after the company said its bottom line would be hurt by weakairline ticket sales.
Following the news, Merrill Lynch’s Henry Blodget cut Priceline’s intermediate-term rating from accumulate to neutral (he kept the stock a long-term buy).
Air Ticket Revenue Off
Priceline said revenue would be between $340 million and $345 million, not the $360 million to $380 million anticipated by analysts. The company said a $20 million to $25 million shortfall in September airline ticket revenue — springing from a lower average offer price and a lower number of accepted offers — was almost entirely responsible for the disappointing sales. Airline-imposed fuel surcharges, flight cancellations and airlines’ own sale fares were the culprits, priceline said.
“This is less about customer demand and more about average revenue per order,” said priceline President and CEO Dan Schulman on today’s conference call. Net loss in the third quarter before items will probably be the same as the second quarter’s loss of a penny per share.
Schulman added that it’s “difficult to forecast revenue in the short term” but that the company is confident it will start growing revenue sequentially again during the spring. “We continue to be focused on building priceline.com as a major consumer brand and as a broad horizontal e-commerce platform,” said Schulman.
Co-Dependence
Asking growth investors to wait until spring for growth, however, isn’t likely to go over too well. priceline’s shares fell 37 percent, to $11.75, in early trading, to an all-time low.
E-commerce rivals Amazon and eBay slipped 3 percent and 1.6 percent, respectively.
Today’s news raises questions about how dependent priceline is on a single industry that is ultimately beyond its control. Priceline’s warning comes as Amazon and eBay, the other two big consumer e-commerce companies that analysts have generally favored, are also trying to move beyond their initial successes into new areas.
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