Think-About-It

Priceline: More Headwinds Ahead

I am surprised that you have shorted PCLN. Throughout your article you consistently mention how strong PCLN's management is. You even close by saying:

"While PCLN is the best operator in its sector... "

Your short thesis appears to be purely one of valuation and not quality. This means that time is not on your side. The longer you wait to close your short position the more the company grows into it's current valuation -- closing your assumed valuation gap.

Let's look at valuation: 2009 EPS = $7.05est
at $94/shr that's a forward PE of 13.3
Their 2009 growth rate = 17% and post 2009 should be able to grow 13% - 15%.

How is this an over valued stock price? Looks like a fair value for a quality growth company to me. Maybe even a bit of a discount. There are a lot better candidates for shorting than PCLN.

Even if you drop the 2009 EPS estimate from $7.05 to $6.48 you are still looking at a forward PE of 14.5. Reasonable by any measure.

I do agree with you economic concerns about the U.S and Europe but would not bank on the Dollar holding its value or rising over next year or so which was one reason you thought earnings expectations might be to high.

Two questions for you:
1. How much revenue does PCLN get from Asia?
2. Is there an Asian PCLN out there like Bidu is to Google?