Stock (Symbol) |
Priceline.com (PCLN) |
Stock Price |
$1,785 |
Sector |
| Retail & Travel |
Data is as of |
| March 30, 2017 |
Expected to Report |
| May 2 – 8 |
Company Description |
 PCLN 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 |
 Priceline (PCLN) is still growing strong as hotel bookings lead the way. The world leader in online travel and related services had its stock climb from $50 to $1500 in ten years as revenue leapt from $1 billion to $10 billion a year. Today the company is still growing strong, via its six brands:
Booking.com has been the growth engine for PCLN, as the company’s International business generated 88% of grows profit last year. Booking added over 289,000 properties in 2016 and now has 1,155,000 hotels, apartments, homes and other places to stay. This helped Priceline achieve 31% hotel room night growth last qtr — its fastest growth since 2014 Q1 — as overall bookings rose 26%. Although PCLN has been one of the fastest growing companies in the world, investors have never given the stock a fair valuation. The median P/E during the past ten years has been just 20. Now, with the stock up more than 35% during the last year, the P/E is 24. My Fair Value is a P/E of 22 which is $1636, thus long-term shareholders might want to take profits and sell a portion of their shares. Also, PCLN began including stock based compensation in its profits in December, thus profit growth rates comparisons will be tough the next 3 qtrs. Still, analysts have an Est. LTG of 17% on the stock, and with booking momentum strong the stock has been going higher. |
One Year Chart |
 Last qtr PCLN delivered 17% sales growth and 13% profit growth which crushed the 4% estimate. Afterwards, NxtQtr’s estimate got slashed, but this didn’t phase investors. Management expects gross bookings growth of 17-22% next qtr, with gross profit growing 10-15%, but EPS is expected to be down due to several factors including advertising expenses and Easter falling in Q2 this year instead of Q1. Estimates for the next 4 qtrs are -16%, 7%, 16% and 11% but PCLN typically underpromises then overdelivers. |
Fair Value |
 My Fair Value is 22x earnings, which meant 10% upside for the stock last qtr, but after the swift rise in the stock this year means 8% downside now. But, honestly a P/E of 24 is what Priceline’s P/E should be (in my eyes). I’ve been waiting on this stock to get a fair valuation for years, and have often pegged my Fair Value P/E at 27 or so, only to be disappointed. So does this shattering of a glass ceiling mean the stock will now keep its higher valuation? I doubt it. I think its hard for stocks to get higher P/Es over time unless profit growth spikes up. |
Bottom Line |
 Priceline is a fabulous stock, the best I’ve owned in my career. But now with the stock based compensation taking a toll on profits (in 2016 & 2017) profit growth isn’t coming in as it should be or as it used to. And when I look at the ten-year chart the stock is clearly extended. Still, that doesn’t mean it’s coming down anytime soon. The trend is your friend and right now the trend is up so ride the wave. But if we get a correction in the market, I will likely lighten up and sell some of my PCLN shares. PCLN ranks 15th in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
15 of 30Aggressive Growth Portfolio 15 of 15Conservative Stock Portfolio N/A |
