Priceline falling over fiscal cliff? Stock down 5%December 10, 2012: 12:23 PM ET
William Shatner's Priceline Negotiator character famously plunged off a cliff in a TV ad earlier this year. Despite fears of his untimely demise, he miraculously survived. But now it looks like shares of Priceline (PCLN) are falling off the fiscal cliff ... and it's not as clear just yet if they'll bounce back as quickly as the Shat.
Priceline's stock lost 5% Monday after Deutsche Bank downgraded it from a "buy" to a "hold." Some traders on StockTwits were talking about how there were legitimate fundamental reasons for Priceline to be taking a hit.
But others speculated that the dip may be temporary. Priceline, like other momentum stocks such as Apple (AAPL) and Google (GOOG) may be falling because investors are worried about possible changes to capital gains taxes in the event that there is no fiscal cliff deal ... or if Republicans agree to higher rates as part of a compromise.
Specifically, the DB analyst seems concerned about more competition from Expedia (EXPE). There's also the possibility that Priceline, which is in the process of acquiring Kayak (KYAK), will face tough competition from Google and its travel software company ITA.
Exactly. And considering that the stock is still up about 35% this year, it's understandable that investors may get scared when an analyst from a big sell-side shop suddenly gets less bullish.
You do always have to be wary of reading too much into how winning and losing stocks do at the end of the year because of taxes. And that effect may be magnified with the big gainers this year due to the fiscal cliff. As for this year's dogs, it is telling that huge laggards like Hewlett-Packard (HPQ) and Dell (DELL) have popped during the past few weeks despite abysmal sales and earnings outlooks.
That really sums up the sell-off best. Priceline is probably down due to a mix of tax concerns and fears that Europe's problems will lead to a challenging year for Priceline in 2013.
So far, analysts have not cut their forecasts due to Europe concerns just yet. And some might argue that the worst of Europe's woes may already be priced in the stock. But considering that Priceline trades at 17 times 2013 profit forecasts -- a slight premium to Expedia -- then bad news may not yet be baked into the stock. Priceline could very well face a tougher climb than Shatner.