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Priceline.com (PCLN) is a travel service that offers leisure airline tickets, hotel rooms, rental cars, vacation packages, and cruises. The company operates as priceline.com, rentalcars.com, breezenet.com, and lowestfares.com. The company's "Name Your Own Price" service (also called its "opaque" business) offers customers a unique value proposition by allowing them to name their own price for online products/services. In these transactions, Priceline.com determines the price it will accept and has discretion in supplier selection. PCLN's value-add to suppliers is that Priceline.com provides a brand preserving sales service that enables them to sell excess inventory without harming their existing retail pricing structure. Priceline.com also has a more traditional travel sales model that allows customers to choose specific suppliers and inventories. Under the retail model, Priceline.com acts as an agent for the airline, hotel or rental car company and the supplier is the merchant of record. The company was founded in 1997 and went public in March 1999.
We have been bullish on PCLN shares since we upgraded the stock in January of 2006, when it was trading around $22 per share. However, we think the stock, which is now trading around $100-$110, is fairly valued. We think it is appropriate to stick with our neutral stance.
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