Perhaps it symbolizes a passing of the torch or maybe it's merely a temporary phenomenon, but Priceline.com, perennially a little guy when compared with Expedia Inc., has overtaken Expedia Inc. in the size of their respective market capitalizations.
As of today, Nov. 17, 2009, Priceline's market cap stood at $9.17 billion.
Expedia Inc.'s market cap registered at $7.21 billion.
PCLN closed at $209.29 per share.
EXPE ended the day at $24.96.
Market cap is derived by multiplying the number of shares outstanding by the share price and it's just one way, however imperfect, of assessing a company's size.
But, because it is tied to share price, market cap is one way of reading how the market views a company's management, business model and prospects.
Priceline, with its growth led by Booking.com in Europe, has been on fire quarter after quarter.
Expedia Inc., which admits it faces a protracted battle in getting acquisition Venere up to speed in Europe and Asia, has lost some sex appeal.
Priceline downplays the significance of the market-cap numbers, while others tell me it's a big deal in terms of investor confidence.
And, investor confidence could fuel further expansion and a larger market cap and sales for Priceline.
However, Priceline spokesman Brian Ek says "tracking our market cap against competitors isn’t something we do. Further, we don’t know who would be viewing this as a big deal."
Au contraire, says Jake Fuller, PhoCusWright’s senior research analyst for finance and analytics, although he believes Priceline's market cap is "aggressive."
"Priceline has a larger market cap and generates less in profit than Expedia," Fuller says. "The implication is that Priceline will continue to grow faster than Expedia."
Fuller's discounted cash flow analysis shows that Priceline would have to generate EBITDA growth of 30%-35% from 2009 to 2012 to justify the hefty market cap, and that kind of EBITDA growth may be difficult to sustain.
"My concern is that rising competition, re-inflation in advertising costs and share shift back to supplier-direct sites in the 2011-2012 timeframe will make it difficult to generate growth on that scale," Fuller says.
Priceline is due to come back down to earth one of these days and Expedia, a formidable competitor and still the king of digital travel, has a substantial lead over Priceline in the advertising/media business, an arena that Priceline has been reluctant to play in.
Still, Travelocity once was the undisputed market leader among travel websites, and has fallen back in the pack.
So, regarding Expedia's dominance, we have to remind ourselves that nothing lasts forever.