Priceline (PCLN) nears a 52 week high: Time to short

Priceline.com Incorporated (NASDAQ:PCLN), which during the financial crisis had as much as 50% short interest, has had a massive short squeeze since February - this was due to a Q1 statmenet where they issued revenue guidance above analyst estimates.

PCLN One Year Chart

What goes up, must come down

In my opinion, it's just a matter of time before PCLN shares re-test the lows experienced in Q1.

The razor-thin profits the online travel agencies get on airline bookings could get even thinner.

As reported last week by the travel research firm PhocusWright, United Airlines (UAUA) is forcing some travel agencies to absorb the 2%-3% credit-card fees for ticket bookings. The PhocusWright blog post asserts that if this approach were widely adopted by airlines and applied to the online travel agencies, “they would be forced to reinstate some sort of booking fee in order to cover the costs of paying credit-card merchant fees.” And that could give a pricing advantage to the airlines’ own web sites.

In a research note yesterday, analyst Jake Fuller of Soleil/Travel Wise Research wrote that it is not yet clear whether United is targeting the online travel agencies to pick up credit-card fees - but he does say if true, the policy would be bad news for the sites.

“After cutting the booking fee” - most of the players in online travel have dropped the fees to stimulate demand - “the OTAs are making less than $10 per ticket, so taking on the credit card fee would be a real problem,” he writes. “The fee could not be passed on because that would put the OTA price above the airlines’ and consumers would go direct. If this move gains traction, it could further dampen ticket
economics. It may be that United is targeting traditional or low-volume agents, and we have not heard other carriers pursuing this, but this is an issue to watch.”

Meanwhile, Fuller also notes that New York Mayor Michael Bloomberg has signed a bill that would force online travel agencies to pay occupancy taxes on the retail price of a room rather than the wholesale price. “Investors will likely see this as evidence that the legal tide is turning against Expedia (EXPE) on the issue and there are numerous other markets looking for back taxes and/or changes in how the tax is paid going forward,” he writes.

Right now I like the October Puts. There is a lot of volume on the $85.00 strike:

Strike Symbol Last Chg Bid Ask Vol Open Int 25.00 PUZVE.X 0.25 0.00 N/A 0.10 0 75 30.00 PUZVF.X 0.20 0.00 N/A 0.10 0 45 35.00 PUZVG.X 0.05 0.00 N/A 0.10 0 145 40.00 PUZVH.X 0.05 0.00 0.05 0.10 3 1,153 45.00 PUZVI.X 0.15 0.00 N/A 0.15 0 114 50.00 PUZVJ.X 0.25 0.00 0.05 0.15 0 61 55.00 PUZVK.X 1.00 0.00 0.10 0.25 0 132 60.00 PUZVL.X 0.35 0.00 0.25 0.45 2 83 65.00 PUZVM.X 0.55 0.00 0.45 0.65 10 88 70.00 PUZVN.X 0.90 0.00 0.75 0.95 30 3,104 75.00 PUZVO.X 1.15 0.10 1.05 1.30 3 156 80.00 PUZVP.X 2.00 0.00 1.70 1.85 11 2,070 85.00 PUZVQ.X 2.80 0.00 2.35 2.60 680 467 90.00 PUZVR.X 5.60 0.00 3.00 3.50 0 372 95.00 PUZVS.X 4.30 0.60 4.20 4.60 24 275 100.00 PUZVT.X 6.00 0.45 5.80 6.10 2 1,220 105.00 PUZVA.X 7.40 0.60 7.50 7.80 64 512 110.00 PUZVY.X 9.70 0.00 9.60 9.80 10 100