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Analyst Blog

The target price of Priceline.com (PCLN - Free Report) was recently raised by many investment firms based on strong third-quarter results.

To name a few, RBC Capital Markets’ analyst Mark Mahaney raised his price target more than 5% to $1,850 with an outperform rating. Cowen analyst Kevin Kopelman raised his price target more than 9% to $1700. Also, UBS analyst Eric Sheridan raised his price target by 11% and Credit Suisse analyst Stephen Ju raised his price target by 2% on Priceline.

Following the third-quarter earnings release on Nov 7, Priceline share price is up by more than 6.0% to $1,570.26.

Analyst Bullish on Q3 Earnings

The analysts remain optimistic about Priceline’s room night growth in the near future. They believe that the company will continue to benefit from rising Chinese travel demand, due to its partnership with China online travel provider Ctrip (CTRP - Free Report) . The analysts expect increasing bookings to expand margin growth in the near term.

In the third quarter, Priceline revenues were $3.69 billion, up 44.4% sequentially and 18.9% from the year-ago quarter. Revenues beat the Zacks Consensus Estimate by 1.9% and were better than management’s guidance of $3.55 billion at the mid-point.

Also, both agency and merchant businesses showed strong momentum. Room nights grew much faster than in the recent past. Rental cars also performed impressively. Room nights grew 6.3% sequentially and 29.4% from last year. Priceline’s room night growth is attributable to its geographically diverse inventory and brand recognition that tend to balance out macro uncertainties related to any one market, as well as growing competition from local and international players.

For the upcoming fourth quarter, Priceline expects room nights booked to grow 20–25% and total gross bookings to grow 16–21% year over year (17–22% on a constant currency basis). It expects gross profit dollars to increase 13–18% (14–19% on constant currency basis), with adjusted EBITDA in a range of $755–795 billion.

Also, the analyst is optimistic about Priceline’s dominance and growth prospects in the strengthening online travel agency (OTA) market. Priceline has been steadily building position in emerging international markets. The company’s international business continues to do very well while the domestic business is being helped by deals, promos, prudent marketing, partnerships and acquisitions.

PRICELINE.COM Price and Consensus

 

PRICELINE.COM Price and Consensus | PRICELINE.COM Quote

Bottom Line

Priceline.com is one of the leading online travel companies in the world. The secular growth trend in the online travel booking market, Priceline’s strong position in international markets, growth opportunities in the domestic market, good execution, prudent marketing strategy and strong financial position are among its positives.

Moreover, Priceline belongs to an attractive industry and has a strong international presence, which is particularly a positive for its business. However, intensifying competition from Expedia, weaker ADRs and macro headwinds remain as concerns.

Currently, Priceline shares carry a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Mercadolibre, Inc. (MELI - Free Report) , with a Zacks Rank #1, and Groupon, Inc. (GRPN - Free Report) with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Mercadolibre, Inc. delivered a positive earnings surprise of 23.58% in the trailing four quarters.

Groupon, Inc. delivered a positive earnings surprise of 31.07% in the trailing four quarters.

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