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Priceline Continues to Produce Rapid Revenue Growth

Stock (Symbol)

Priceline.com (PCLN)

Stock Price

$1,521

Sector
Retail & Travel
Data is as of
January 7, 2017
Expected to Report
Feb 15 – 20
Company Description
priceline_negotiatorPCLN is a provider of online travel and travel related reservation and search services. PCLN, through its online travel agent (OTA) services, connects consumers wishing to make travel reservations with providers of travel services across the world. The Company’s brands include Booking.com, KAYAK, agoda.com, rentalcars.com and OpenTable. PCLN offers consumers accommodation reservations, including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties, through its Booking.com, priceline.com and agoda.com brands. Its priceline.com brand also offers consumers reservations for rental cars (rentalcars.com), airline tickets, vacation packages and cruises. PCLN also provides an online price comparison service from various travel Websites through KAYAK. OpenTable provides its services to consumers and reservation management services to restaurants. Source: Thomson Financial
Sharek’s Take
David SharekPriceline (PCLN) continues to grow rapidly, even at this enormous size. The world leader in online travel and related services has had its stock climb from $50 to $1500 in ten years as revenue leapt from $1 billion to $10 billion a year. Still, even at this size the company was able to grow sales 19% last qtr, as profits increased 17%. Gross profit was $3.6 billion, with $3.3 billion coming from International operations, which are more than 80% of overall sales. Priceline has multiple divisions with growth opportunity for the future including Booking.com, OpenTable, KAYAK, Ctrip as well as HomeAway and management believes its gaining market share everywhere. As of September 16, 2016, Booking.com offered more than 1 Million accommodations, up 30% year-over-year. Last qtr, PCLN’s room nights sold increased 29%, rental car days rose 13% and airline ticket sales fell by 3%. The company doesn’t disclose how much revenue comes from these different divisions, but I’m dying to know. Priceline continues to be a juggernaut in not just travel, but online sales overall. It will go down in history as one of the top dot-coms off All-Time. But alas, growth isn’t what it was years ago, and analysts have an Estimated Long-Term Growth Rate of 17% per year on the stock. My 2017 Fair Value is $1670 per share, which would be 10% upside from current levels. Annual profit estimates have come down during the past year, but management has historically underpromised to overdeliver. 
One Year Chart
This is one growth stock that had a good year in 2016, which was odd as value stocks ruled the market last year. Last qtr PCLN had 17% profit growth, which missed estimates of 18%. PCLN’s CFO said 2017 is off to a “solid start” yet qtrly and annual profit estimates got reduced rather sharply. 2016’s profit est. fell from $68.57 to $64.62 and 2017’s from $79.92 to $75.91. Qtrly estimates came down big time. Here’s Estimates for the next 4 qtrs (with what it was last qtr in parenthesis): 4% (was 14%), 4% (17%), 8% (16%), 16%.
Fair Value
My Fair Value is 22x earnings, which equates to 10% upside for the stock in 2017. But, annual estimates have declined during the last 12 months, and I’m concerned that could continue. Still, I would stay invested in this stock as its a tough one to trade.  
Bottom Line
Priceline stock has had a fabulous decade, with yearly stock growth of 43% per year on the back of 41% yearly profit growth. But now profits are expected to climb 17% next year and 17% per year long-term, which is still good considering the company’s size. Still, I’m not as high on PCLN as I usually am as the estimate reductions are a lot to absorb. 2016’s profit est have fallen from $69.38 to $64.62 the last 4 qtrs, as 2017’s dropped from $80.93 to $75.91. Years ago PCLN used to underpromise then overdeliver. Overall, Priceline is a good core large cap growth stock to build a portfolio around. PCLN ranks 15th in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings.
Power Rankings
Growth Stock Portfolio

15 of 34

Aggressive Growth Portfolio

15 of 18

Conservative Stock Portfolio

N/A

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