2 Big Concerns Coming Out of Priceline's Q2 Earnings Report
Despite beating Wall Street expectations, online travel agency The Priceline Group (NASDAQ: PCLN) stock fell over 7% after announcing Q2 numbers. Much of the blame has been pinned on a weaker than expected forecast but with a history of sandbagging, Wall Street should be skeptical of Priceline's quarterly guidance. The company has only guided toward consensus estimates twice in the last two years. Yet Priceline has crushed Wall Street estimates by an average of 7.8% over that same time period.
With the stock trading at a lofty 40 times trailing-twelve-months earnings and 8 times sales, something like a weak forecast, despite its lack of credibility, may have been reason enough to exert pressure on Priceline stock. However, there are a couple items of note that came out of the second quarter report that investors should be nervous about.
Removing currency effects, year-over-year gross bookings increased 19% in the second quarter. Gross bookings is a key metric for Priceline as it captures the total dollar value of all travel services booked through Priceline brands. While 19% bookings growth appears impressive on the surface, it was a marked slowdown from the 27% year-over-year growth it achieved in the first quarter of this year. It was also the slowest growth rate the company has experienced since the heart of the global recession in the second quarter of 2009.
Source: Fool.com
