Similar to my recent post on Apple (AAPL), I have to wonder if Ctrip (CTRP) is worth selling. The stock hit a new 52-week high yesterday, and appears to be selling at quite a premium. The stock trades at over 62x trailing twelve-month earnings. This looks rich even for a company that continues to grow at over a 25% year-over-year rate.

In its most recent quarter, net revenues grew by 27% on a year-over-year basis. Including the effects of share-based compensation, net earnings were up 23% on a year-over-year basis. In its outlook, Ctrip projects 25% growth for its third quarter. This projection is likely conservative as management tends to deliver higher growth than forecast.

Priceline (PCLN) has been on a roll lately. The shares have more than doubled in the last six months alone and the analysts seem to be putting it in the “walk on water” class. However, the higher the shares climb, the more dangerous they become, as their potential fall becomes that much greater. It is safe to say the stock has gone up too far in too short of a time frame and is certainly prone to a correction through a wicked dose of profit taking.

Since reporting second quarter earnings, the shares have been on a tear, tacking on an impressive 20% gain from $130 to $155 just in the last nine sessions. Is it sustainable? Probably not, as the shares seem to be trading more on emotion and momentum than logic. If you add in the fact that some scared shorts are being forced to cover, then the upward force is even more compelling. The problem is, these types of rallies are usually not sustainable and this appears to be a classic case of sellers honing in on greater fools to dump their shares on them. Somebody will be left holding the bag when everybody decides to head for the exits at the same time. A minimum retracement of one half its recent $25 run-up since Aug 10th appears plausible.

In March and April of this year, some of the biggest online travel agencies (OTAs) cut their flight booking fees. The booking fee changes were largely a response to competitive pressures: why would a consumer pay a fee on an OTA site when the same flight is available at the same price on the airline site without a fee? Moreover, Priceline (PCLN) has been operating without flight booking fees since the summer of 2007. Compete leveraged behavioral data from its panel of millions of US consumers to examine who wins and who loses in a world without flight bookings fees.

The short answer is that the impact was strong, immediate, and beneficial for the OTAs. Moreover, Orbitz, (OWW) the OTA most reliant on flight booking fees, has generated impressive improvements in flight bookers and flight booking efficiency since dropping its booking fees on April 7th.

Below is a chart outlining the 2009 year-to-date performance of the sectors within the Russell 2000 (based on the sector classification of The Applied Finance Group). The Consumer Services sector has led the way thus far, while Utilities and Financials have dragged down the overall performance of the index.

As part of a great conversation in the comments over at The Sovereign Speculator, I prepared a list of short-sale candidates meeting the following criteria:

Total assets > 50 * tangible book
EBITDA(ttm) / EV yield less than 5%
Debt > 3 * market cap
Interest coverage ratio MRQ < 1.5

Online travel booking site Orbitz (OWW) is soaring Wednesday morning, up 79 cents, or 21%, at $4.52 after the company reported Q2 sales that were in line with estimates and a profit per share where a loss had been expected.

Net revenue fell 19%, year over year, the company reported, to $188 million, in line with analysts’ estimates. Profit per share of 12 cents is in striking contrast to the 6-cent loss per share expected. Although gross bookings were down 12%, year over year, they were up 22% from Q1, the company noted. The company saw better returns from its online marketing effort, it reported. That, and cost cuts initiated last year, resulted in adjusted Ebitda of $45 million, up 23%.

These companies have been moving up solidly in the past several months and according to some analysts, they still have a ways to go. Any of these would make nice additions to a diversified portfolio.

In this post I have identified an updated list of 26 stocks which have broken out on big (very unusual) volume. As always, I believe the stocks listed in this post are worthy of adding to the stock watch list.

As stated at the bottom of this post, I have chosen two stocks from the list which I may be speculating with in the weeks to come. Last week I had a stock LaserCard (LCRD) which I speculated with Monday the day after posting it, and the day they reported earnings (after the bell). It is a week later, and up over 50%. Here is the outcome to that trade.

Though Google (GOOG) and Yahoo (YHOO) were still the most visited web properties in the US in June, Facebook rose to #6, and Twitter - which has displayed astronomic growth over the past year - has cracked the list for the first time at #46, according to the monthly analysis of US web activity at the top online properties from comScore’s Media Metrix service.

Background:

OTAs have traditionally charged airline ticket booking fees ($5-$7 per ticket). Recently the top 3 U.S. OTAs (Expedia (EXPE) -43% market share, Orbitz (OWW) -26%, Travelocity-22%) followed Priceline’s (PCLN) example and removed these booking fees permanently. When Priceline removed these fees back in 2008, they quickly gained market share: from 7% in 2007 to 9% in 2008 (PhoCusWright).

• Obama draws a line on auto aid. The White House rejected a request by auto-parts suppliers for up to $10B in new aid, saying the government shouldn't get more involved in the industry's contraction and signaling there's a limit to how much taxpayer money can be sent to the auto industry. Suppliers are now turning to Congress for the money.
• Bidders for First Republic. Carlyle, Blackstone (BX) and TPG are reportedly leading a group of bidders in talks to buy Bank of America's (BAC) First Republic Bank. Bank of America inherited First Republic in its acquisition of Merrill Lynch, and could get as much as $700M for the San Francisco-based bank.
• Morgan bucks TARP. Sources say Morgan Stanley (MS) will repay its TARP money today, returning all $10B in loans. Today is the first day eligible banks can begin repaying government aid. Separately, Morgan is also planning to revamp its prime-brokerage unit to lure back hedge-fund clients that left the firm. As part of the changes, hedge-fund clients will be able to hold part of their assets in a Morgan-owned trust company rather than in the firm's brokerage units.
• Quotables. "Wall Street seems to maybe have a shorter memory about how close we were to the abyss than I would have expected." -Obama, ahead of today's release of financial overhaul plans. (Read a draft of the reforms (.pdf) )
• Virus shuts down Genzyme plants. Genzyme (GENZ) is shutting down production at its main U.S. plants for several weeks, after discovering a virus in one of the vats used to develop drugs. The closed plants include the only facility which produces two of Genzyme's best-sellers, and company officials said they expect to face shortages of both drugs as a result. This is the latest in a series of manufacturing missteps for Genzyme, and could cost the company $100-300M in lost revenue.
• Reynolds safe on patents. R.J. Reynolds (RAI) won a high-stakes patent case against Star Scientific (STSI) over a new method of curing tobacco that reduces certain cancer-causing toxins. Star had been seeking several hundred million dollars in patent-infringement damages, but the court ruled that Reynolds didn't infringe Star's curing patents and that the patents were invalid. Star plans to file a motion for a new trial. STSI -78.7% premarket (7:00 ET).
• BlackRock gets BGI. Barclays (BCS) accepted BlackRock's (BLK) $13.5B cash-and-stock offer for its Barclays Global Investors asset-management business, closing the door on any counterbids. Barclays will pay CVC Capital Partners $175M as compensation for exercising an option to reject CVC's earlier bid.
• Investors bet on BHP purchase. Credit-default swaps on BHP Billiton (BHP) rose 16% yesterday, the most in almost 8 months, on speculation the mining company is planning a large acquisition. Shareholders are eager for growth and are looking for a deal much bigger than the recent $5.8B venture signed with Rio Tinto (RTP). Merrill Lynch recently estimated the company could spend as much as $40B on any future acquisition. Shares -1.7% premarket (7:00 ET).
• Nuclear heats up. Power companies UniStar Nuclear Energy, NRG Energy (NRG), Scana Corp (SCG) and Southern Co. (SO) are expected to split $18.5B in federal financing to build the next generation of nuclear reactors. The government has not yet formally announced its picks, but sources say these four firms are the likely winners from a group of seventeen companies that applied for federal loan guarantees.
• Travel websites face payments over damages, taxes. Expedia (EXPE) and other online travel companies may have to pay millions of dollars in damages and uncollected taxes under recent court rulings in Georgia and Washington state. Expedia is also being sued in Texas, as is rival Orbitz Worldwide (OWW).
• Buy Chinese. Just a few months after slamming a proposed 'Buy American' clause in the U.S. economic rescue package, China has introduced a 'Buy Chinese' policy as part of its stimulus program, amplifying trade tensions and raising the possibility of retaliation. The policy, released jointly by nine government departments, says government procurement must use only Chinese products or services unless they're not available or can't be bought on reasonable terms.
• U.K. gets tougher on banks. U.K. Treasury chief Darling plans to tell banks they need to improve their governance and hold more capital against losses. The changes will move the U.K. farther away from the 'light touch' regulation that made it a magnet for banking activity.
• Retail sales fall. Chain store sales fell 4.5% in the first two weeks of June vs. last month, Redbook reported, worse than the -4.1% expected. According to ICSC, weekly sales were down 0.6% vs. last week as consumers faced rising gas prices and unfavorable weather.
• MBA apps fall. Mortgage applications fell 15.8% last week, MBA reported, as prospective buyers wait to see if interest rates will come back down. The average interest rate on 30-year fixed-rate mortgages fell to 5.5% from 5.57%.
• Housing starts beat expectations (.pdf). May Housing Starts of 532,000 came in above the 500K consensus. April starts were revised to 454K from 458K. Permits, an indication of future starts, were 518K. Starts were down 45.2% from last year's 971K.
• PPI inches up. May's Producer Price Index rose 0.2% from April, vs. consensus of +0.6% and +0.3% last month. Core PPI -0.1% vs. consensus of +0.1% and prior +0.1%. PPI is -5% vs. a year ago, while core PPI is +3% Y/Y.
• Industrial production dips down. May Industrial Production came in at -1.1% vs. consensus of -1% and last month's -0.7% (revised from -0.5%). Capacity utilization was 68.3% vs. last month's 69%.

Earnings: Wednesday Before Open

• FedEx (FDX): FQ4 EPS of $0.64 beats by $0.13. Revenue of $7.85B (+23.3%) vs. $8.32B. Sees FQ1 EPS of Q1, sees EPS of $0.30-0.45 vs. consensus of $0.68. (PR)

Earnings: Tuesday After Close

• Adobe (ADBE): FQ2 EPS of $0.35 in-line. Revenue of $705M (-20.5%) vs. $695M. Sees FQ3 EPS of $0.30-0.37, in-line, and revenue of $665-715M vs. $676M consensus. (PR)

Today's Markets

Asian markets closed mixed, but Europe is heading down while U.S. futures try to gain some traction.

Paid search traffic took a major hit in the past year in all of the major categories tracked except for education, and is down 26% over the same period in 2008, according to a recent analysis by Hitwise, MarketingVOX writes.

Q1 2009 Earnings Call

May 6, 2009 10:00 am ET

On the heels of Moody’s publishing a list of “bottom rung” companies most likely to default, Audit Integrity ups the ante with the preliminary findings of a new quantitative model designed to identify large companies most at risk of bankruptcy.

Chairman Jim Kaplan says their approach is to “combine both the power of static (accounting-based) and hazard (market-based) models. This approach allows for dynamic adjusting for potential bankruptcy between financial reporting periods.”

This week is all about damage control, especially related to the big bad AIG bonus blunder. Treasury Secretary Geithner will attempt to divert attention from that whole mess by releasing the details of his toxic financial asset program at the start of the week. However, on Tuesday, both Geithner and Bernanke are scheduled to testify before the bloodthirsty House Financial Services Committee. The President hopes to limit public perception damage by appearing on prime time television that same evening. We're guessing he intends to clear up the impending massacre of Geithner before the media feeding frenzy begins. Talk about pulling out all stops - President Obama will have made three unconventional television appearances within the course of a week, and that's not to mention his NCAA Tournament bracket selection show...

The President is doing all he can to keep his new Treasury Secretary propped up through a barrage of criticism that began almost from the moment of his selection for the role. For the life of me, I can't see why anyone would accept any Administration position now that deals with financial or economic matters.

The recession is having a mixed impact on travel habits and, of course, on travel companies. Let’s take a look at three companies that recently announced results.

The $3.5 billion online travel major, Priceline (PCLN) surpassed the market’s expectations in its Q4 results. After having slipped in the last quarter, Priceline is now regaining some of its lost valuation.

Q4 2008 Earnings Call Transcript

February 24, 2009 10:00 am ET