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Priceline.com shares catch fire

Shares of Priceline.com Inc. (Nasdaq: PCLN) shot up 9 3/8, or 8 percent, to 130 7/8 Friday after Merrill Lynch raised its sales estimates for the second quarter as well as for both fiscal 1999 and fiscal 2000.

Merrill Lynch analyst Henry Blodget said Priceline.com's recent performance "appears to have been significantly ahead of our expectations and nothing short of extraordinary."

Blodget boosted his second-quarter sales estimate from $60 million to $65 million. He also raised the sales estimates for fiscal 1999 and fiscal 2000 from $265 million to $300 million and $415 million to $450 million, respectively.

"Priceline.com's stock appears extraordinarily expensive, but the company's early growth suggests to us that it could eventually grow into its valuation," Blodget said in a research report. "The stock remains a core holding in our Internet portfolio and we would consider using the recent weakness as a buying opportunity."

Last week, Priceline.com posted a smaller-than-expected loss in its first quarter, losing $17.2 million, or 12 cents a share, on sales of $49.4 million.

That $49.4 million in sales was a 160 percent improvement compared to the year-ago quarter.

Earlier this week, Priceline.com said it sold 7,000 airline tickets in one day and 30,000 tickets in one week. Most analysts predicted the company would sell an average of 2,500 tickets a day in the second quarter.

Blodget said that while gross profit margins will decline sequentially as a result of a change in the revenue mix, its gross profit will likely increase significantly.

In the first quarter, gross profit margins slipped 3 percent from the fourth quarter to 11 percent. But its customer base grew to 531,000, up 86 percent from the fourth quarter.

First Call consensus expects Priceline.com to lose 11 cents a share in its second quarter and 42 cents a share in the fiscal year.

All three analysts following the stock maintain either a "buy" or "strong buy" recommendation.

Shortly after its initial public offering in March, the stock skidded to a low of $58 a share. By mid-April it was trading at $165 a share.