Is Priceline.com Priced Out?September 15 | Posted by Kevin Monaghan | Top Story
Shares of Priceline.com (PCLN) have taken off in the last 8 years. Shares were trading under $10.00 in 2003, and are now flying high at over $500.00 today. The company continues to report great revenues at home and abroad, but can they keep growing at the feverish pace they have been… … … Eh, maybe?
First let’s look at the chart and what it’s saying. The uptrend has lost its gusto and now the stock is struggling to hit new highs. The 50 day and the 200 day moving averages are narrowing, with the stock price even crossing the 200 day moving average briefly. Now the shares seem to range bound until they find a new direction.
As a trader, I remember seeing Travelzoo.com (TZOO) have wild swings where traders and investors made a fortune, and then quickly lost it. Travelzoo, and the airline business in general, kept me out of stocks like Priceline.com, and I regrettably never pulled the trigger on it even though it caught my attention many times. Hindsight is a missed opportunities way of mocking traders, especially me for missing Priceline’s massive move.
If you read through Priceline’s earnings reports and you’ll see why the stock has been able to push higher. They keep hitting incredible earnings growth in a competitive and challenging environment. Some of the challenges threatening Priceline’s growth have been the airlines have trying to launch their own booking sites, airlines trying to lower the revenues paid to booking sites, and now Google (GOOG) has entered the business with its own booking site. The first two haven’t turned out to be much of a threat, but watch out for the GOOG. At the current price levels we’re not going to get excited about Priceline’s stock, especially given Google’s ability and history of stealing market share from others.
How would we trade Priceline?
What we would watch for with this stock is if it can move to new highs (above the line we’ve drawn on the chart above), where we’d look to pick up shares for a technical trade higher. On that same note, if the shares move below the 200 day moving average or the 50 day crosses the 200 day, we’d look to short the stock with puts.
An investor will have a ton of “I almost bought that stock,” “I wish I bought,” or “I would have bought if” statements in your investing life. It’s just part of investing… but man; this is one I wish I bought.
Disclosure; Author, Kevin D. Monaghan of Elite Investment Group, is long GOOG.