WEBVTT - Morningstar's Wasiolek Says Priceline is Well Positioned(Audio)

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<v Speaker 1>Stocks are under pressure again today. Dallas currently lower by

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<v Speaker 1>a hundred and three points, as if you drop thirteen

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<v Speaker 1>and NAZAC falls thirty six. The small cap six hundred

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<v Speaker 1>to one point seven eight percent. Seven out of tennis

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<v Speaker 1>B sectors are lower, led by losses and industrials, energy

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<v Speaker 1>and the financials, games and utility, Staples and telecom Transports

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<v Speaker 1>falls seventy points and as a bio text are down

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<v Speaker 1>two point eight percent and the VIX is higher by

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<v Speaker 1>five percent. Doll Leators in the downside included Caterpillar, GE

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<v Speaker 1>and Goldman Sachs McDonald's, Procter and Gamble, and Coca Cola

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<v Speaker 1>led to the upside. Some of the names supporting after

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<v Speaker 1>de Belts and I include Test Electric Advisor, Whole Foods, MetLife,

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<v Speaker 1>and ficked It Live in the first breaking news desk

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<v Speaker 1>on Bill Maloney, Katherine, thank you Bill to hear live

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<v Speaker 1>breaking news over your Bloomberg type s q U a

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<v Speaker 1>K on your terminal. Crude oil has narrowed an earlier

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<v Speaker 1>advance of two point eight percent after the government reported

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<v Speaker 1>that crude inventories rose in the US last week. West

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<v Speaker 1>Texas Intermediate crude up twenty one cents a barrel to

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<v Speaker 1>eighty six about gold down nine dollars thirty cents an

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<v Speaker 1>ounce of twelve eighty two fifty and the Tenure Treasury

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<v Speaker 1>is up six thirty seconds with the yield of one

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<v Speaker 1>point seven seven percent. And that's the Bloomberg business flash

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<v Speaker 1>you're listening to taking Stock with Kathleen Hayes and on

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<v Speaker 1>Bloomberg Radio. In the easter holiday, a lot of spending

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<v Speaker 1>on new advertising campaigns, and weaker demand for travel to

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<v Speaker 1>France in China. All of these hit price Line Group

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<v Speaker 1>second quarter profit now suffering according to price Line and

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<v Speaker 1>saying this in a statement. Investors are not in a

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<v Speaker 1>very forgiving mood though, because price Lines share is share

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<v Speaker 1>prices tell me the most in three and a half years.

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<v Speaker 1>Putting a whole lot more on Price Line Group's interim

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<v Speaker 1>in chief executive Jeffrey Boyd, who has been back just

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<v Speaker 1>a week reclaiming an old job that he had left.

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<v Speaker 1>Let's bring in our next guest to bring this all

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<v Speaker 1>together for us, Dan Musselic, senior equity analyst at morning

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<v Speaker 1>start joining us from Chicago. So Dan, first of all,

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<v Speaker 1>let's talk about Jeffrey Boyd, what brought him back and

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<v Speaker 1>Boyle boy, they need all the help they can get

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<v Speaker 1>right now? Uh? Yeah, I mean, I guess that remains

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<v Speaker 1>that you've seen. If they need all the health they

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<v Speaker 1>can get, we probably we'll talk about that in a minute,

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<v Speaker 1>but yeah, I mean, so we heard last week that

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<v Speaker 1>the former CEO, Darren Houston, who we view as an

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<v Speaker 1>effective CEO, had to resign for um uh conduct that

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<v Speaker 1>was contrary to the code of Ethics. So that brought

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<v Speaker 1>Jeffrey Boyd, who was still the chairman of price Line

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<v Speaker 1>back as CEO at least in the interim, and as

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<v Speaker 1>you alluded to, he was a former CEO. He was

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<v Speaker 1>really paramount and making price Line into the domino t

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<v Speaker 1>a that it is today. He was the CEO from

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<v Speaker 1>two thousand and one to two thousand thirteen, and at

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<v Speaker 1>that time he made a big acquisition in two thousand

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<v Speaker 1>five of Booking dot Com that really made price Line

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<v Speaker 1>into this dominant otia that we see today. So, Danny,

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<v Speaker 1>what do you think is it a stock worth buying

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<v Speaker 1>right now? It's down a hundred and ten dollars, it's

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<v Speaker 1>down about eighty three the last print. Yeah. You know,

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<v Speaker 1>our view, as we see this as an opportunity, price

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<v Speaker 1>Line is a high quality company. We believe it's well

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<v Speaker 1>positioned in a large in the large and growing online

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<v Speaker 1>travel industry, and that it's trading at attractive valuation here.

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<v Speaker 1>So you know, what we saw essentially was a very

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<v Speaker 1>very strong first quarter where the key metrics we're ahead

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<v Speaker 1>of expectations and actually superior growth to Expedia on an

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<v Speaker 1>organic to organic comparison. And then you know the reason

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<v Speaker 1>the stock is down is that the second quarter guidance

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<v Speaker 1>was quite weak and implies that there's going to be

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<v Speaker 1>a meaningful decline in demand as well as a pickup

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<v Speaker 1>in near term spending. Our view on that is, you know,

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<v Speaker 1>we have several reasons to believe that that space. The

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<v Speaker 1>weaker guidance is based more on macro and conservatism factors

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<v Speaker 1>versus any increased competitive situation for Priceline. Speaking of competitive

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<v Speaker 1>why is Priceline so dominant? Is it? Captain Kirk's a

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<v Speaker 1>William Shatner. There's so much competition in that space. You

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<v Speaker 1>mentioned Expedient, how about Kayak? How about so many discount

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<v Speaker 1>websites that are easy to navigate. Um, you can get

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<v Speaker 1>all kinds affairs out there. What is Priceline doing so well? Yeah? So,

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<v Speaker 1>I mean there's been a lot of consolidations, so Expedient

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<v Speaker 1>and Priceline have been part of that consolidation, and they've

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<v Speaker 1>reached reached a point in our opinion where it's really

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<v Speaker 1>tough for any others to compete against them. You mention

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<v Speaker 1>and Kayak. Priceline actually acquired Kayak in two thousand thirteen,

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<v Speaker 1>And Expedia has made a bunch of acquisitions recently, such

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<v Speaker 1>as Orbits. Orbits was the number three competitor before it

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<v Speaker 1>was acquired by Expedia and really was unable to effectively

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<v Speaker 1>compete on a marketing and technology scale that expedient Priceline

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<v Speaker 1>are able to, so they have that scale advantage, they

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<v Speaker 1>have you know, the network effect advantage where they have

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<v Speaker 1>a bunch of properties and other travel supply on their

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<v Speaker 1>network um. And in addition to that, the reason why

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<v Speaker 1>pricelines growth has been so strong is their focus is

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<v Speaker 1>really more in international markets, and those international markets have

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<v Speaker 1>hotels that are more independent or boutique versus in the

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<v Speaker 1>US they are more made of large brands such as

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<v Speaker 1>Hilton and Marriott and for the vet reason, and international markets,

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<v Speaker 1>those smaller hotels really depend on the channels such as

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<v Speaker 1>Priceline to try to drive um booking bookings to to

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<v Speaker 1>their to their to their hotels. What kind of margins

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<v Speaker 1>are we talking about for these international sal and small

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<v Speaker 1>boutique hotels you describe, Yeah, so I guess, uh, Priceline

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<v Speaker 1>Expedia get a commission um on each hotel room that's sold,

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<v Speaker 1>and internationally, you know, the companies don't disclose those for

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<v Speaker 1>competitive reasons, but you know, for international markets often probably

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<v Speaker 1>commissioned rates for hotels are probably around mid to high

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<v Speaker 1>teams and that compares with you know, the US markets

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<v Speaker 1>that are more consolidated with those larger brands where those

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<v Speaker 1>commission rates might be high single digit, low double digits.

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<v Speaker 1>So it is uh, you know, it is a stronger

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<v Speaker 1>economic channel to be uh well positioned in those markets.

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<v Speaker 1>You know, how the global economy and the macro picture,

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<v Speaker 1>how does it look right now for hotels, for travel

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<v Speaker 1>websites broadly because there is still concern kind of goes

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<v Speaker 1>up and down in terms of the temperature of that

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<v Speaker 1>concern in the markets that that there's a lot of

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<v Speaker 1>there's a lack of demands and would say in many

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<v Speaker 1>parts of the world. Yeah, I mean, I think there's

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<v Speaker 1>been two things with the with the macro environment. So

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<v Speaker 1>the one are the terror tacks, uh, you know, the

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<v Speaker 1>last several months in Paris and Brussels and not having

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<v Speaker 1>some impact, but you know, barring I guess continued to tax.

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<v Speaker 1>What we have seen historically are though those pauses are

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<v Speaker 1>are short lived and that people you know, value travel,

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<v Speaker 1>especially Europeans, and that they do return to travel. But

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<v Speaker 1>that is one reason why there might be a near

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<v Speaker 1>term pause. And the second one is you know, economic growth, uh,

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<v Speaker 1>you know, I guess globally and especially internationally has shown

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<v Speaker 1>some some signs of weakening. Dan Wessiliak, Thanks very much

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<v Speaker 1>for joining US senior equity analyst to morning Star based

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<v Speaker 1>in Chicago. You're listening to taking Stock on Bloomberg Radio.

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