Stock (Symbol) |
Priceline.com (PCLN) |
Stock Price |
$1,851 |
Sector |
| Retail & Travel |
Data is as of |
| June 20, 2017 |
Expected to Report |
| Aug 2 |
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. 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) had profits (in EPS) fall 6% last qtr, but that was due to stock-based compensation now being accounted for in the financials. Gross profit was up 16% from a year-ago, and management believes gross profits can grow 17-22% this qtr on a constant currency basis. Constant currency is key, as the USD had Been high in previous years, thus bringing down profits. Now with the dollar lower, multinationals like Priceline might not have charges for F/X. Priceline has a its seven distinct brands:
PCLN is in the midst of acquiring Momondo, which owns the Cheapflights brand, for $550 million in cash. Cash is king, as profits then would flow into EPS. Booking.com has been the growth engine for Priceline, as the company’s International business generated 88% of grows profit last year. Booking added over 289,000 properties in 2016 and now has 1,200,000 hotels, apartments, homes and other places to stay. This helped Priceline achieve 27% hotel room night growth last qtr. Priceline has an Estimated Long-Term Growth Rate of 17% per year, which sounds about right to me (I know PCLN well, I’ve owned the stock for more than a decade now). But this year profits in EPS will be negatively affected as PCLN began including stock based compensation in its profits in December, thus profit growth rates comparisons will be tough the next 2 qtrs. But investors have shrugged off the poor growth figures and pushed shares to All-Time highs. PCLN is a solid buy-and-hold stock for growth investors, but the P/E is beyond the historical average. |
One Year Chart |
 Last qtr PCLN delivered 12% sales growth, which was down from 17% the qtr earlier. Still, this didn’t bring the stock down. Profits in EPS fell 6% but beat the estimate of -16% growth. Management guided estimates lower, but they’ve been doing that for years. Profit Estimates for the next 4 qtrs are 2%, 14%, 10% and 16% but PCLN typically underpromises then overdelivers. |
Fair Value |
 My Fair Value is 22x earnings, which is on par with PCLN’s long-term trend. For years I felt the P/E should be 27 and would wait to no avail. Now the stock market is giving the stock a higher P/E, but I don’t know if this higher P/E will stick. Certainly a 17% grower with record profits each year is worth 25x earnings, but that hasn’t been the case in the past. |
Bottom Line |
 Priceline is one of the best stocks in our lifetime. Profits don’t grow as fast as they did five years ago, but 17% or so growth is still good for a juggernaut like this. With economies across the world doing well, travel is strong, and PCLN with its stable of brands have a clear road ahead for continued growth. PCLN ranks 16th in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
16 of 33Aggressive Growth Portfolio 16 of 16Conservative Stock Portfolio N/A |
