Sorry, the Price Isn't Right on priceline

This stock could run up, but only if things go right. There's just too much risk here.
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I have been impressed with the progress at

priceline.com

(PCLN)

, but I stillthink there's too much risk here to justify buying the stock.

I liked how management said the company has a good shot at breakingeven in the fourth quarter. Given the weakness in the travel industry overthe past two months, that statement suggests that priceline's business may havebottomed. Another thing that intrigued me was priceline's continued marginimprovement; its cost-cutting and strong cash position ($151 million atlast count) mean it can continue to compete on a strong footing with thelikes of

Travelocity

(TVLY)

and

Expedia.com

(EXPE) - Get Report

.

Most of all, I was pleased to see that two priceline officers, JeffreyBoyd and Robert Mylod, bought a combined 75,000 shares during September at$2.20. And that its chairman, Richard Braddock, acquired 750,000 shares (at80 cents a share through an option exercise) but did not sell the stock.That says he thinks the stock is headed higher, too.

But has all this good news changed my opinion on priceline? Alas, no.Though I think the shares could rally, assuming the travel industrycontinues to rebound, priceline is still a risky proposition.

For this company to generate meaningful profits in years tocome, it's going to have to seriously build out its mortgage or automotivebusiness. But at the moment there is little evidence that these areas will evergrow like priceline's travel business.

There is also a risk that the domestic economy will slip into an evendeeper recession, and that the travel business continues to deteriorate. Ifeither of these scenarios plays out, priceline could be dead money for anawful long time.

The bottom line is that although I think you can make money withpriceline, management still has a long way to go to prove that the companycan generate sustainable profits. Remember, this is the first really bigslowdown in business that the company has experienced. And for that reason aloneit makes sense to proceed with caution.

In keeping with TSC's editorial policy, Glenn Curtis doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Curtis welcomes your feedback.