Shares of Priceline and TripAdvisor dropped sharply after both online travel websites released quarterly earnings reports that raised questions about their growth prospects in the fiercely competitive sector.
Priceline — which operates sites including Kayak, Booking.com, OpenTable and its namesake Priceline — saw its shares fall more than 11 per cent in early trading to $1,682.31, putting them on track for their biggest one-day drop since June 2016.
The move lower comes a day after the Connecticut-headquartered company, which has a market capitalisation of more than $93bn, gave a profit forecast for the current quarter that fell short of analysts’ expectations.
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Priceline said it expects net income for the last quarter of 2017 to come in between $625m and $655m, or $12.60 to $13.20 per diluted share — the midpoint of which is about 4 per cent lower than a year earlier, said Daniel Finnegan, Priceline’s chief financial officer and chief accounting officer, on a call with investors.
Analysts had been looking for net income of $733m, or about $14.70 a share, according to FactSet.
The quarterly guidance has also suffered from comparison to the prior-year period in 2016, which saw room-night growth hit its highest point in several years, Priceline executives said.
Nevertheless, Priceline earnings for the third quarter came in ahead of expectations. Revenue grew 22 per cent from the same period a year earlier to $4.4bn while net income grew 240 per cent to $1.7bn, or $34.43 a share.
While the cloudy outlook damped investors’ enthusiasm for Priceline stock, some analysts were not as bothered, pointing out that it still has plenty of room for growth, despite its size, and that it was adjusting its marketing strategy.
“Given the volatility in the sub-sector over the past two months, we expect many investors need time to digest how to frame the potential forward operating trends,” wrote UBS analyst Eric Sheridan.
Analysts were less sanguine about TripAdvisor — which offers travel reviews, booking and other services — as it saw its quarterly results miss expectations amid a decline in hotel room sales.
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Shares in the company fell 18 per cent on Tuesday to $32.36, positioning them for their worst-ever one-day fall since going public in 2011.
It said on Monday evening that revenue rose 4 per cent in the third quarter to $349m. Net income fell to $25m in the three months ending in September, down from $55m in the prior-year period, and user review and opinion growth cooled to 32 per cent in the third quarter, down from 39 per cent in the second quarter.
Jefferies analysts said the company, which was spun off from travel booking site Expedia, “remains a ‘transition’ story that is taking longer than expected to show improvement” amid a tougher competitive environment.
Perry Gold, an analyst with MoffettNathanson, said TripAdvisor was also struggling to adapt to trends like the shift in traffic from desktop computers to less profitable smartphones, as well as shifting marketing strategies by companies like Priceline.
In midday trading on Wall Street, US equities indices were coming down from record highs touched just after the opening bell.
The S&P 500 was down 0.2 per cent to 2,586, and the Dow Jones Industrial Average also declined 0.2 per cent to 23,491.3. The Nasdaq Composite fell 0.4 per cent to 6,757.
Jessica Dye and Mamta Badkar in New York
