Priceline CEO Seeks Growth After Boyd’s ‘Hundred Bagger’Ari Levy
Darren Huston has a tall task at Priceline.com Inc., succeeding the guy who generated a 100-fold stock surge over the past 11 years, racing the company past Expedia Inc.
Huston, 47, was named chief executive officer yesterday of the Norwalk, Connecticut-based company, replacing Jeffery Boyd, who is staying on as chairman. Huston, a former Microsoft executive, joined Priceline in 2011 as head of Booking.com, the European unit that’s fueled the company’s expansion.
Now that Boyd has established Priceline as the top site for booking hotels in Europe and built a growing presence in Asia through the purchase of Agoda.com, Huston is left to squeeze growth out of a more mature market. Priceline started running Booking.com promotions early this year in the U.S. to build the unit’s brand, and in May the company acquired Kayak Software Corp. for about $1.8 billion to capture revenue in hotel search.
Boyd “had the foresight to make some of these international acquisitions that have really driven the growth of the company,” said Aaron Kessler, an analyst at Raymond James & Associates Inc., who has the equivalent of a buy rating on the stock. “The Booking.com business has continued to grow at strong rates and continued to gain significant market share.”
Boyd, 57, has been CEO of Priceline since 2002, overseeing a surge in sales and profit and helping bolster the stock from about $10 to more than $1,000. He moved the company from a U.S. site for reserving flights and some other offerings to the dominant service for booking hotels, the most profitable side of online travel.
On yesterday’s conference call, Mark Mahaney, an analyst at RBC Capital Markets, congratulated Boyd on the “hundred bagger” and said “I don’t think I’ve seen that before and may not see that again.”
In a report today, Michael Purcell, an analyst at Stifel, called Boyd “the architect and steward of Priceline’s turn-around ascension.” He wrote that “the succession plan is not a surprise and we do not view it negatively.”
Huston will become CEO and a board member Jan. 1. He previously spent eight years at Microsoft, serving in several roles including head of the Japan business, and before that he was an executive at Starbucks Corp.
The new CEO has some challenges ahead. While the company reported third-quarter sales that topped analysts’ estimates, it provided a fourth-quarter earnings forecast that trailed projections. Huston suggested on yesterday’s call that he’ll be continuing to lean on Boyd.
“In the coming months, my focus will be to work with Jeff, the brand CEOs, and group leadership to make sure we stay the course on the execution of our business strategy,” Huston said. He wasn’t available for an interview.
The stock rose 4.9 percent today to $1,073.20, its biggest jump since January. The shares are up 73 percent this year, while Expedia is down 2.5 percent.
Boyd said on the call that as Priceline expands in Asia, sales there won’t increase as quickly as they have been in Europe, because there’s less Internet penetration. International bookings, which account for 85 percent of the business, increased 42 percent in the third quarter, slowing from 44 percent in the second quarter.
Priceline’s online advertising costs jumped 42 percent to $533.2 million, while offline advertising more than tripled to $40 million as the company promoted Booking.com in the U.S. The company said on the call that these investments will lead to “pressure on margins” in the current quarter.
Profit, excluding some items, will be $7.80 to $8.30 a share in the fourth quarter, trailing the $8.34 average analyst projection, according to data compiled by Bloomberg.
“We’re seeing slight weakening in their economic profit,” said Craig Sterling, an analyst at EVA Dimensions in New York. “When we start to see little cracks, it’s usually not a good sign.”