Citi analyst Mark Mahaney likes Priceline’s recent decision to eliminate booking fees, and he also still likes the moonshot of a stock. He thinks that the booking-fee cut is offensive rather than defensive and that it will wreak havoc on other online travel agents who eat and breathe on such things.
Mahaney’s key points:
- PCLN permanently cuts air booking fees.
- An offensive move to increase domestic share; competitive advantage until competition matches; and source of near term margin pressure (but believe volume will eventually offset).
- Bad for rest of industry. “A new negative overhang for the financial health of the online travel agent industry” (Expedia, et al).
- Buy Rating: Emphasis on European growth & U.S. profitability has been successful; and good way to play the European online travel market.
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