Priceline.com (PCLN): Be your own travel agent

The establishment of online travel sites finally allowed consumers the luxury of being able to compare available services. The outfit that really set the pace, though, was the one that also let folks haggle over the price.

Priceline.com (NASDAQ: PCLN) is an online travel agency. It offers a range of services, including airline tickets, hotel rooms, car rentals, vacation packages and cruises, as well as destination and travel insurance services. The company operates a Name Your Own Price system, which allows users to make offers for travel services at prices they set. It also markets fixed-price travel products and offers various online financial services. Expedia (NASDAQ: EXPE) is a major competitor.

The firm pleased investors earlier in the month, when it reported Q2 EPS of $1.11 and revenues of $355.9 million. Analysts had been expecting 90 cents and $354.2 million. In discussing the solid quarter, the CEO emphasized a 93% gross bookings growth rate at the firm's Booking.com hotel reservation service. Management also guided Q3 EPS to $1.21-1.31 ($1.07 consensus), FY07 EPS to $3.50-3.65 ($3.10 consensus) and Y07 gross travel bookings to $4.50-4.65 billion ($4.10-4.25B previous estimate). Susquehanna Financial, Stifel Nicolaus and Banc of America Securities subsequently declared the stock a "buy."

Shares popped above 30-day and 50-day moving average resistance on the news and then moved into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the shares with two "strong buys," seven "buys" and five "holds." Analysts expect a 23% growth rate, through the next year. The PCLN Price to Sales ratio (2.26), Sales Growth rate (15.68%), EPS Growth rate (101.82%), Return on Equity (19.49%), Revenue per Employee ($1.76M) and Net Income per Employee ($123k) compare favorably with industry, sector and S&P 500 averages.

The stock is one of those used to calculate the AMEX Internet Index. Over the past 52 weeks, it has traded between $30.26 and $79.99. A stop-loss of $66.00 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.