Priceline (PCLN) shares were down nearly 15% in early trading Wednesday a day after the company late Tuesday issued weak Q3 guidance, though its Q2 earnings crushed analyst forecasts.
The cautious Q3 outlook was driven by economic fears, mostly about Europe, where Priceline does the biggest chunk of its business. Also, Priceline's Q2 revenue narrowly missed estimates, as we reported.
And rival Orbitz Worldwide (OWW) was down nearly 20% early Wednesday after it, too, gave a weak outlook it blamed on macro economic fears.
Norwalk, Conn.-based Priceline late Tuesday said it earned $7.85 a share minus special items, up 43% from the year-earlier quarter and 49 cents above the consensus estimate of 22 analysts polled by Thomson Reuters.
Revenue rose 20% to $1.33 billion, just shy of analyst views of $1.35 billion.
For the current quarter, Priceline expects to earn $11.10 to $12.10 a share, excluding items, on revenue of $1.58 billion to $1.67 billion. Analysts were expecting $12.10 and nearly $1.8 billion.
JPMorgan analyst Doug Anmuth said in a research note that Priceline's Q2 results and Q3 guidance were disappointing overall "as the company is feeling greater effects from a worsening macro environment in Europe."
Anmuth noted that despite posting 44% growth in currency-neutral international bookings in Q2, Priceline didn't exceed the high end of guidance for the first time in nearly four years.
But Anmuth blames the sluggish global economy. "Therefore, we do not view current trends as thesis-changing," he said in his note.
Anmuth is keeping his overweight rating and a 2013 year-end price target on Priceline of 650. The stock is trading near 582.30.
Nomura Securities International analyst Brian Nowak said in a research note that Q3 guidance and Q2 international bookings disappointed. He also noted that U.S. bookings rose only 5% in Q2 vs. analyst expectations of 9%.
"We continue to like (Priceline's) global share-gaining model, but remain on the sidelines until we can find a more material source (or region) of incremental earnings upside," Nowak wrote.
Nowak maintained his neutral rating on the stock, but lowered his price target to 700 from 740.
Priceline rival Expedia (EXPE) jumped late last month when it issued Q2 results that beat,as we reported. Expedia spinoff TripAdvisor (TRIP), which offers user-generated reviews, tumbled last month on its results. Shares of both companies fell more than 4% in early Wednesday trading.
Orbitz early Wednesday reported lowered profit for Q2 and lowered its full-year outlook, like Priceline citing macro economic concerns, as Reuters reported.
As for Priceline, the company late Tuesday also announced a tie-up with China'sCtrip.com International (CTRP) . Under the agreement, Ctrip, which mostly serves domestic Chinese travelers, can reach Priceline unit Booking.com's global portfolio of over 235,000 participating hotels through Ctrip's hotel reservation services. This means that Booking.com's hotel inventories will be offered in addition to the hotels already in Ctrip's hotel reservation service. Analysts say the deal is Priceline's most serious effort to date to tap consumers in China's burgeoning travel market.
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