Priceline.com shares were flying high Tuesday after an upgrade report from Goldman Sachs said the company is well on its way to recovery and predicted strong results from the company's first quarter.
Shares in the online travel agency, which lets users bid for airfare, hotel rooms and other services, were up $1.12, or 23 percent, to $5.97, a significant rise from their 52-week low of $1.06.
Priceline, based in Norwalk, Conn., will report first-quarter earnings after the bell this afternoon.
Goldman Sachs analyst Anthony Noto upgraded the stock to "market outperform" from "market perform," based on improvement in the company's outlook.
Priceline "is still in a turnaround phase, but the progress made to date positions the company to better control its destiny with (the first quarter) potentially being its last unprofitable quarter," he wrote.
Priceline had missed estimates by a wide margin in its fourth quarter, but projected that it could turn a profit by its second quarter.
Management has successfully "rightsized" the company's cost structure by cutting costs and postponing an expansion that would not have been profitable for at least 12 months, Noto said.
The airline industry overall is also seeing a turnaround, Noto observed. With increases in airline costs and a declining percentage of seats sold, he said, conditions are "the opposite" of those in the third quarter of 2000, which "derailed" sales growth.
A report from competitor Expedia (Nasdaq: EXPE) after Monday night's bell gives credence to the predictions for an industry recovery. Expedia posted its first operating profit and said it was seeing strong momentum.
For the first quarter, Noto predicts Priceline will see 17 percent sequential revenue growth, which will in turn drive a 65 percent sequential improvement on the bottom line to a loss of 5 cents a share. First Call's consensus also predicts the company will report a loss of 5 cents a share in its first-quarter report.
In the second quarter, Noto said he expects positive pro forma earnings per share. First Call estimates a break-even amount per share.>