William Shatner has returned for the 11th year as the enigmatic spokesperson and premier negotiator for lower travel costs for Priceline.com (NASDAQ: PCLN).
Priceline is confident that Shatner can pick up where he left off as an effective voice for the online discount travel service.
There is reason for optimism at the company. Priceline revenues and earnings for the first nine months of the year increased by 30%, outpacing the meager 2% increase in retail sales for the period, and besting the 8% increase in sales for e-commerce retailers, as well.
Revenues and earnings for the fourth quarter are also expected to run well ahead of the retail sales figures for the period.
At the current price of $65 per share, Priceline is trading at under 10 times forecasted earnings for the year. The market appears to be significantly undervaluing the company at this price level, as several analysts are lowering the stock to a neutral position based on the recent rise in price that took the stock near their target levels.
Additional concerns affecting the analysts' view of Priceline include the general softening of consumer demand, declining hotel pricing and the strengthening of the U.S. dollar.
In reality, these same concerns can be viewed as a positive for the company.
The company's primary business is attracting new customers, as the economy drives consumers to be extremely cost-conscious. Consumers are continuing to react positively to the ability via Priceline to "Name Your Own Price" (NYOP), which is the mainstay of the company's travel planning format.
NYOP is becoming increasingly popular with travelers looking for value, and among hotel operators looking for ways to unload inventory. As the economy continues to operate in a recessionary mode, services like these will become even more attractive and popular.
Priceline earnings are also positively impacted by the company's variable cost structure and its declining stock count. The company's cost structure is substantially driven by customer activity, so a drop-off in business activity has the immediate result of lowering costs. With no inventory to dispose of, expenses are primarily in the area of product development and maintenance.
The reduction in the number of outstanding shares is the result of the company stock buyback plan. The principal consequence of the stock reduction activity is an increase in the company's earnings-per-share ratio. As that ratio declines, buying activity in the stock should increase, driving the price up as well.
Trading at around $67 per share, the stock is about 50% above its 52-week low, but well below the high for the period of $144.
Jamie Dlugosch is a contributor to InvestorPlace.com.
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