Value Conundrum: Priceline Worth More Than All U.S. Airlines Combined (PCLN, UAL, DAL, LCC, LUV, ALK, JBLU, SAVE)

OK, so maybe it pays more to be one of the companies that blew out the travel agent jobs than it does to own an airline. After all, Warren Buffett said to never own a commercial airline carrier. All references aside, there is something worth noting here. Even after the earnings debacle at Inc. (NASDAQ: PCLN), its market valuation is now more than the entire U.S. airline sector’s major carriers combined.

Even after a huge drop of nearly 15% to $578 and some change on the stock price after poor sales and lower guidance, Priceline’s market capitalization rate is still $28.8 billion. If you know anything about airline stocks, you know that the market refuses to value them highly. When their earnings multiples are so low like they are now (4 to 6 times earnings in many cases), all investors have to do is remember how bad these perform in recessions and when fuel prices go through the roof.

So back to the valuation conundrum. Priceline is becoming more and more of an international travel destination giant. It may be hard to refer Priceline just to the U.S. carriers, but many individuals still only think of Priceline as a domestic air bidding destination.

So we tallied up the valuations of the major U.S. carriers. This includes Southwest Airlines Co. (NYSE: LUV), Delta Air Lines Inc. (NYSE: DAL), United Continental Holdings Inc. (NYSE: UAL), US Airways Group Inc. (NYSE: LCC), JetBlue Airways Corp. (NASDAQ: JBLU), Spirit Airlines Inc. (NASDAQ: SAVE) and SkyWest Inc. (NASDAQ: SKYW). Of course the valuation of AMR is up for grabs, considering that it is in bankruptcy and may be acquired by Delta or US Air.

In fairness, Priceline now has more than 165,000 hotels in its arsenal, it also offers deals on cruises, cars and vacation packages. Still, what do you think when you have airlines trading at earnings multiples on the floor and the booking agency trading at almost 20-times expected earnings?

So far we have seen analyst downgrades from the likes of BofA/Merrill Lynch and Stifel Nicolaus.

Here is a table showing the combined market valuations of the U.S. air carrier sector, minus the wild card of AMR that is …

Airline Carrier Market Cap ($B)
Southwest Airlines Co. (LUV) 6.7
Delta Air Lines Inc. (DAL) 7.8
United Continental Holdings Inc. (UAL) 6
US Airways Group Inc. (LCC) 1.6
JetBlue Airways Corp. (JBLU) 1.4
Alaska Air Group Inc. (ALK) 2.4
Spirit Airlines Inc. (SAVE) 1.5
SkyWest Inc. (SKYW) 0.4