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Priceline ( PCLN ) stock surged Wednesday after the company reinforced recent statements from online travel rivals Expedia and TripAdvisor that the global economic slowdown was not having a big impact on its business. Priceline also posted Q4 earnings and revenue above Wall Street estimates. Its Q1 sales guidance met views, but its EPS outlook missed at the midpoint. The company said that it expects Q1 sales to rise 9% to 16%, where Wall Street estimates 12.5% growth. The company sees earnings per share ex items rising 10% to 18%, where analysts have modeled 18% growth, to $9.62. Q4 sales rose 9% from the year-earlier quarter to $2 billion, modestly beating Wall Street’s expectations of $1.95 billion. But, as in some past quarters, Priceline’s earnings shattered expectations. The company posted earnings per share minus items of $12.63, up 16% and 83 cents above the consensus estimate of $11.80 by analysts polled by Thomson Reuters. Priceline stock gapped up more than 12% at the open on the stock market today and was up 11%, near 1,235, in afternoon trading Wednesday. Shares have recouped nearly all their losses in the tough 2016. Priceline has an IBD Composite Rating of 77, where 99 is the highest. Expedia stock was up 5% in afternoon trading Wednesday, while TripAdvisor was up 3%. Priceline’s Q4 earnings are hot off the heels of rivals Expedia ( EXPE ) and TripAdvisor ( TRIP ), which both reported last week. TripAdvisor with Q4 EPS and sales that beat expectations, and Expedia with its executives’ comments, eased fears that a slowing global economy was hurting the online travel industry. And in their Q4 earnings conference call, Expedia executives said that currency would be less of a factor. Priceline’s $12 billion in Q4 also beat analyst estimates. RBC Capital Markets analyst Mark Mahaney said that lower airline fares — thanks to lower oil prices — and lower foreign exchange costs helped travel. Mahaney reiterated his outperform rating on Priceline stock, with a 1,700 price target. On the company’s Q4 earnings conference call with analysts, Priceline CEO Darren Huston praised his workforce. “Being a leader on online travel and building an experienced marketplace isn’t achieved by simply electronically connecting demand with supply,” Huston said on the call. “It may be a surprise to some, but about two-thirds of our employees are working in either the supply or customer service organizations. “The hard work of making this a daily reality is achieved by thousands of dedicated and energetic people around the world having these properties and then working with our partners on an ongoing basis to ensure that our customers have the most choices of places to stay at the best prices available.” Priceline’s ad costs, though, top personnel costs. The company said that its total personnel costs for Q4, including stock options, rose 14% to $312.8 million. The firm said that it spent $582 million on online advertising during the quarter, up 16% from $500 million in the year-earlier quarter. Analyst ‘More Positive’ About Priceline Outlook RBC is “incrementally more positive” on the stock, Mahaney wrote in a research note following the earnings release. He added that both growth and profitability remained strong. “We are more confident that Priceline will generate accelerating growth in 2016,” he wrote, “Thanks in part to foreign exchange stabilization, but also thanks in part to material new growth opportunities that Priceline has been investing in for years.” Mahaney reiterated his thesis from his earnings preview note that Chinese global travel, Latin America, business travel and alternative accommodations would drive Priceline growth. “Alternative accommodations” refers to hotel-like units available via the so-called “sharing economy.” San Francisco-based Airbnb is among the new breed of companies that lets people rent their homes, or just rooms in their homes, to travelers. Investors have valued the privately held Airbnb at more than $20 billion — though the Wall Street Journal and others have recently attacked such lofty valuations for failing to assess the value of shares properly. The WSJ reported that even sophisticated investors such as mutual funds have trouble accurately judging the value of such startups and have had to write down several investments from tech unicorns such as Dropbox and Uber. Priceline’s market valuation is near $64 billion, by far the highest among the 11 companies in IBD’s Leisure-Travel Booking industry group. No. 2 Expedia has a market cap under $17 billion. In the past, Mahaney has called Priceline “well hedged” against the fast rise of alternative accommodations providers such as Airbnb and Expedia-owed HomeAway. Though Expedia executives have said that alternative accommodations have not yet had a “material” impact on its bottom line, Expedia CEO Dara Khosrowshahi recently told IBD that Airbnb has clearly “grown up” and that the brand has “clearly rung a bell for customers.” Scalper1 News
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