Don't bet against Priceline (or William Shatner)

chart_ws_stock_priceline.cominc.top.png By Paul R. La Monica, editor at large


NEW YORK (CNNMoney.com) -- William Shatner is a modern day King Midas.

He's still adored by millions of Trekkies. Or is it Trekkers? His new CBS sitcom "$#*! My Dad Says" enjoyed solid ratings when it premiered last week. And that little online travel company he does commercials for is doing quite nicely.

paul_lamonica_morning_buzz2.jpg

Yes, Priceline.com (PCLN), which Shatner has been a spokesman for since 1998, has amazingly become one of Wall Street's tech darlings lately. The stock is up over 60% year-to-date and is currently trading around a 52-week high of $350 a share.

On Tuesday, when other hot momentum tech stocks such as Apple (AAPL, Fortune 500), Netflix (NFLX) and Baidu (BIDU) all fell, Priceline bucked the trend and rose again.

The company's market value is about $17 billion. To put that in perspective, Priceline is worth almost twice as much as Southwest Airlines -- despite the fact that Southwest (universally regarded as the best-run airline) is expected to generate nearly four times as much revenue as Priceline this year.

So can Priceline stock continue to head even higher? There is a compelling case to be made that it's still a relatively decent bargain.

The company has come a long way from its late 1990s roots as a quirky (and niche) online travel site that offered customers the ability to name their own price. That's still part of the company's business but it's more of a classic discount travel agency now than just a source for last-minute deals.

And despite its big run, Priceline is trading at about 23 times 2011 earnings estimates. That isn't cheap but it's not ludicrously high considering that earnings per share are expected to surge 45% this year and 23% in 2011.

That's stunning growth -- especially when you consider that Priceline, which has expanded aggressively into Europe, was hit by worries earlier this year about how the euro debt crisis and trans-Atlantic travel halt due to the Icelandic volcano would impact profits.

But Priceline has made a living from defying the odds. The stock was left for dead in the wake of the dot-com bubble's bursting in 2000.

In 2003, the company needed to engineer a reverse stock split, which reduces the shares outstanding in order to artificially raise the stock price, to avoid being delisted. Reverse stock splits are often viewed as an act of desperation.

Now, with a stock price firmly in the triple-digits, it's reasonable to wonder if Priceline might do a real stock split -- in which the price gets lowered after boosting the share count.

Of course, investors in any hot stock have to exercise caution. The stock is far more expensive than rival Expedia (EXPE), which is trading at about 15 times 2011 profit forecasts. But Priceline's valuation is roughly in line with Orbitz Worldwide (OWW), which is more of a turnaround story.

So Priceline does appear to be the clear leader in the sector and momentum is on its side. If nothing else, it seems that betting against William Shatner is a risky proposition. The Shat clearly has a knack for picking winners.

Who said frugality is dead? Quick update to Tuesday's column about retailers. I mentioned that not every stock in the sector would be a winner and that consumers are still pinching pennies. Guess what? Super discounter Family Dollar Stores (FDO, Fortune 500) reported profits and sales that topped forecasts Wednesday. The stock gained nearly 3% on the news.

- The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney.com, and Abbott Laboratories, La Monica does not own positions in any individual stocks.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,804.80 26.65 0.15%
Nasdaq 4,765.38 16.98 0.36%
S&P 500 2,070.65 9.42 0.46%
Treasuries 2.18 -0.03 -1.27%
Data as of 11:42pm ET
Company Price Change % Change
Bank of America Corp... 17.62 0.09 0.51%
Apple Inc 111.78 -0.87 -0.77%
General Electric Co 25.62 0.48 1.91%
Intel Corp 36.37 -0.65 -1.76%
Microsoft Corp 47.66 0.14 0.29%
Data as of 4:04pm ET

Sections

New York Magazine reporter Jessica Pressler, who has been caught up in controversy this past week, will not be moving on to a new job at Bloomberg News. More

Investors beware: These 5 global crises are likely to rattle the stock market and world economy. More

Forums in dark corners of the web sell the kinds of hacks that befell Sony. More

Unilever sued Hampton Creek over its egg-free mayonnaise spread Just Mayo. But the company behind Best Foods and Hellman's mayonnaise has now dropped the lawsuit. More

The income of the top 1% jumped significantly in 2012, far outpacing inflation. Not only did this group make a larger share of the country's income, their share of total taxes also jumped from 35% to 38%. More


Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.