Priceline.com (NASDAQ: PCLN), a web-based booking business that fights it out with Expedia (NASDAQ: EXPE), was red-hot during yesterday's session. Shares closed higher by 14%. Volume rocked. The Q2 numbers were strong, and the market rewarded the results without hesitation.
Revenues increased 17%. According to TheStreet.com, adjusted profit of $2.02 per share walloped estimates. Wall Street was only booked for $1.79 per share. The analysts really missed this one. It's understandable, though. Whether we're close to the end of a recession or not is debatable, and I'm sure they wanted to be conservative with the models.
The press release indicates to me that Priceline should continue to do well. The demand for travel services seems to be there, and you can make a pretty sound argument that the company knows how to leverage its brand equity to convince budget-conscious travelers to stop by its domain and book a flight or two.
Yet, when I look at the guidance, I can't help feeling that the stock is overvalued. Also, the performance of the shares has been so outstanding. The stock hit $150 on Monday. The 52-week low is around $45. It's not the most powerful 52-week range ever recorded, but it nevertheless is compelling in its own right.
Priceline is clearly in momentum territory. From a technical perspective, this could be the time to buy. A fundamental take, on the other hand, would suggest otherwise. I am reminded of Apple (NASDAQ: AAPL) when I look at Priceline. It's this high-priced stock that you swear should get weak, but you know it might not. And it drives you insane.
You want to trade Priceline? Make sure you use a tight stop. You want to invest in Priceline? All I can say is, wait for a better price.
Disclosure: I don't own any company mentioned; positions can change without notice.
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