Priceline shares rally on strong quarterly profit

CHICAGO (Reuters) - Shares of online travel agency Priceline.com (PCLN.O) jumped more than 17 percent on Tuesday, a day after the company reported earnings that beat forecasts and posted large gains in bookings and revenue.

The stock was up 17.5 percent at $204.13 in early trading on Nasdaq. Citigroup (C.N) in a research note raised its price target for Priceline to $240 from $200.

Priceline on Monday said it made its third-quarter profit on increased bookings in an "exceptionally strong" summer travel season.

The company, best known for its name-your-own-price auction, proved itself to be a cost-effective solution for consumers and suppliers during the recession, Citibank said in a research note.

Other analysts also applauded the company.

George Askew at Stifel Nicolaus noted that Priceline beat its own guidance.

"We believe Priceline.com is the master among companies we cover of providing conservative earnings guidance and then delivering actual results that significantly exceed the prior guidance," he said in a research note. "We expect Priceline to continue to under-promise and over-deliver going forward."

The travel industry has been battered this year by economic turmoil that has eroded travel budgets. Online travel agencies like Priceline have responded with fee cuts and promotions that helped bolster bookings.

(Reporting by Kyle Peterson, editing by Dave Zimmerman)