Priceline.com (PCLN) - the stock that William Shatner built with his snappy TV ads - is on a tear this year, jumping more than 47%. With earnings hot off the press the stock popped after hours. Is Priceline stock as much of a bargain as its travel fares?
Priceline's Chief Executive Jeffrey Boyd joins the guys for this conversation. Here are excerpts from what was said.
Why are e-commerce stocks hot right now?
“With e-commerce stocks I think you’re seeing recognition,” explains Boyd. “That as these businesses grow their scale gives them an ability to build their operating margins.”
He adds “That’s the big story behind Amazon (AMZN) and Princeline. (We) saw some earnings leverage in Q2… and I think that’s one of the reasons why share price traded up after the announcement.”
What is it about scale and online retail?
“What really happens is, on the expense line,” says Boyd. “There are investments you need to make to build your infrastructure and customer service… and to build an organization that can handle a business in large volume,” explains Boyd.
“Once you’ve made that investment a lot of those costs are fixed....There are still some variable costs, but your fixed costs aren’t growing as fast as the business is growing - and that creates earnings leverage.”
How much bigger can profits become?
“Our gross bookings rose 33% year over year in Q2 and yet our pro forma net income more than doubled. That gives you an idea of the kind of leverage you can get,” explains Boyd.
How important is William Shatner to your company?
“Mr. Shatner is a great asset and I agree that he does a great job advertising our domestic business,” says Boyd. “But most of our growth.. is coming from our international business. And our brand for that business is Booking.com. We don’t use Mr. Shatner, in fact we don’t run any ads at all for that business.”
Dylan asks the guys what they think of this stock?
All the traders like this stock. Eric Bolling also recommends looking at Ctrip.com International, Ltd. (CTRP)
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Trader disclosure: On Aug 7 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Najarian Owns (CSCO), (NMX),(GS); Bolling Owns (NMX)