New stock pick: Long Priceline (PCLN) & Short Travelzoo (TZOO)

By: ispeculatornew
Date posted: 07.05.2010 (4:00 am) | Write a Comment  (1 Comment)

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I might be getting some complaints about my lack of originality but honestly, why would I change something that is working. I have already done 2 successful trades on Priceline this year (+20,91% vs Expedia & +25,75% vs Priceline) but I still see an opportunity to trade the name against its competition. Priceline has by far the most efficient business model and while I can see more interesting aspects to Expedia, Travelzoo continues to look very expensive in my opinion. You will see a lot of the same arguments I used the last time but basically here it goes:

No matter what the size, Priceline is the growth stock among these two and has shown that for quarter after quarter. You can also take a quick look at the traffic stats of the two websites and easily see which one is rising and which one is losing traffic. So why Travelzoo is still trading at a higher P/E ratio is beyond me.  There are some more worrying trends regarding online travel websites when you consider that Google looks set to offer its own services but that will affect both websites in different but fairly equal ways. Priceline is about much more than flight searches which is for now the main way that Google will get involved in the market.

I think that Travelzoo is similar to BlueNile in many different ways mostly because while they are good businesses, they always seem to trade way ahead of their actual value and represent good shorts because of that.

P.S: Since US markets are closed today (Independance day), this trade will be opened tomorrow.

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1 Comment

  1. […] – Apple (AAPL) – Google (GOOG) – Rosetta Stone (RST) – Research in Motion (RIMM) – Priceline (PCLN) […]

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