Priceline's Woes Unfairly Punish Other Net Stocks
Most of its problems are company-specific, so don't panic.
Most of its problems are company-specific, so don't panic.
What Happened?
Priceline.com's (PCLN) 40% drop in the wake of an earnings warning sent many other Internet stocks falling in sympathy Wednesday. Yahoo , eBay (EBAY), and Travelocity were all down more than 10% for the day, and most other stocks in the sector were down as well.
What It Means for Investors
We think this sell-off is an overreaction and creates an opportunity for investors who want exposure to Internet stocks. The bulk of Priceline's problems are specific to its business model, and have little, if any, effect on these other companies. Yahoo, for example, gets the bulk of its revenue from ad sales, while eBay gets the bulk of its revenue from user fees. Neither is affected by fuel prices or demand for airline tickets, two of the major factors behind Priceline's decline.
If there were a general slowdown in Internet traffic or online spending, this sympathetic decline might be understandable. But Priceline said that more people than ever are visiting its site and bidding on tickets; the problem is that fewer of their lowball bids are being accepted. Priceline has also shot itself in the foot with poor customer service and unfortunate marketing decisions. We think that other Net stocks are due for a bounce once the market realizes how Priceline-specific Wednesday's news really is.
David Kathman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.