Priceline Is Ready for an Upgrade -- Ahead of the Tape
February 26 2017 - 03:04PM
Dow Jones News
By Steven Russolillo
Priceline Group Inc.'s stock price is north of $1,600. It isn't
as expensive as it looks.
Priceline long ago graduated from just a euphoric internet stock
to a successful online travel agency. Since 2001, as the tech
bubble was bursting, shares have surged at a 40% annual rate,
pushing Priceline's market capitalization above $80 billion.
Priceline is the only S&P 500 stock with a quadruple-digit
share price. The next closest are Google parent Alphabet Inc. and
Amazon.com Inc., both with prices roughly half of Priceline's.
Sticker shock shouldn't fool investors ahead of Monday's earnings
report, the first under new Chief Executive Glenn Fogel .
Analysts polled by FactSet expect earnings of $12.89 a share, up
2% from a year earlier. Revenue is estimated to have increased 16%
to $2.3 billion.
Priceline relies on booking commissions for growth, benefiting
from websites Kayak.com, Booking.com and its namesake
Priceline.com. International opportunities have helped juice growth
in recent years. Analysts' long-term projections are optimistic,
too, as double-digit annual earnings growth is expected through
2020, according to FactSet.
Over the past five years, Priceline has exceeded quarterly
earnings estimates all but twice. One of those misses came in
November, when it took a $941 million write-down on OpenTable.
Priceline bought OpenTable for $2.6 billion for 2014, a surprise at
the time considering Priceline historically had focused its
investment on travel brands.
That rare misstep might not deter Priceline from future deals,
particularly as it is now under the helm of Mr. Fogel. A former
trader at Morgan Stanley and longtime Priceline employee, Mr. Fogel
was instrumental in key deals more than a decade ago for Booking
BV, which helped Priceline expand in Europe, and reservation
service Active Hotels.
Most travel-related stocks have surged following the election,
with many leaving Priceline behind. A basket of hotels, timeshares,
cruise operators and airline stocks tracked by Rob Sanderson of MKM
Partners is up 22% on average since Nov. 8, exceeding the S&P
500.
Priceline has long outperformed the rest of the online travel
industry, but since the election it has lagged behind in a big
rally, up just 4%. The company's shares are a bit pricey, fetching
22 times projected earnings over the next 12 months, but below a
recent peak of 25 times three years ago. The stock is also cheaper
than many rivals.
If the travel industry stays strong, Priceline has more room to
go.
(END) Dow Jones Newswires
February 26, 2017 15:49 ET (20:49 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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