Dissecting a Sheep: Inside Salomon's Shameful priceline.com Advice

This is a tale of Wall Street that would be funny if it weren't so sad and typical. It's the story of Salomon Smith Barney analyst Tim Albright and his touting of e-commerce company priceline.com (PCLN Quote) to the bitter end. It could just as well be about dozens of other analysts and well-known firms of the day.

See Also
More Questions for priceline.com After Grocery Operation Shuts Down
priceline Stumbles, Overshadowed by Yahoo!'s Success

Albright, 35, has been an analyst at Salomon Smith Barney for six months. (It is also worth noting that his firm's investment bankers helped underwrite priceline's initial public offering .) In that time he has been a relentless bull on the stock.

On Aug. 22, a mere seven weeks ago, Albright recommended in a report that investors buy the stock. After meeting with priceline CEO Dan Shulman, Albright wrote, "Under-anticipated upside potential in Q3, new growth categories poised for takeoff, and the prospect of profits get us jazzed." The report was titled "PCLN: Management Visit; The Business Is Much Better Than The Stock." He set a price target of $130 a share. The stock closed that day at $24.75.

On Sept. 27, nine days ago, Albright penned another report called, "priceline.com, ROIC [return on invested capital] Inflection Is a Great Time to Buy." He wrote, "We are confident in priceline's bottom-line performance. This is not a 'buy it for the quarter' call, but rather, a 'buy it for the model' call. In our opinion, the PCLN model is about to bloom before our eyes and current levels in the stock offer a buying opportunity." He set a new 12-month target price for the stock -- $56 a share, 80 times his estimate of 2002 earnings. That day, the stock closed at $10.75 a share. ...