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Priceline Eases Fears Of Global Travel Slowdown, As Did Rivals

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.”

Bluebird Bio Starts First CAR-T Cancer Trial; Juno Gets An Upgrade

Biotech Bluebird Bio ( BLUE ) was trading up sharply Wednesday after the company said it started testing its cell therapy in blood cancer, triggering a $10 million payment from partner Celgene ( CELG ). And another Celgene partner, Juno Therapeutics, also was up Wednesday, after getting an upgrade. Last June, Bluebird and Celgene agreed to a three-year collaboration to develop Bluebird’s chimeric antigen receptor T cell (CAR-T) therapies targeting the B-cell maturation antigen (BCMA) to help the body fight cancer. On Wednesday, Bluebird said the first patient of its phase-one study of its candidate bb2121 in multiple myeloma had been treated, yielding a $10 million option-to-exercise payment from Celgene. Bluebird stock was up more than 7% in afternoon trading on the stock market today , near 54. “While Celgene’s opt-in decision doesn’t come entirely unexpected, we view the decision positively since it further validates Bluebird’s CAR-T effort,” wrote Leerink analyst Michael Schmidt in a research note. “While several other groups have been working on myeloma CAR-T programs, anti-BCMA CAR-T data from Bluebird’s collaborator at the NCI (National Cancer Institute) . . . has been most promising to date in our view.” Celgene’s lead drug Revlimid is currently one of the most popular treatments for multiple myeloma, but since it’s due to lose patent protection in a few years the company has been looking at newer technologies. Meanwhile, another Celgene partner in CAR-T, Juno Therapeutics ( JUNO ), got an upgrade from Guggenheim on Wednesday based on both valuation and a reassessment of its spending habits. “Juno has been steadily amassing an arsenal of tools to increase efficacy and reduce toxicity of T cell therapies,” wrote analyst Tony Butler as he upgraded the stock to buy from neutral and set the price target at 41. “It is a pay-me-now-or-pay-me-later scenario. . . . While not all of these investments may pay out in the future, it is likely that one or two will, and they could provide Juno the opportunity to surpass the competition or, at the very least, to stay at the vanguard of T cell therapies.” Juno stock was up more than 6.7% in afternoon trading, near 34.

Applied Materials Seen Topping $2 Bil In Q1 Sales, Again

Chip gear-maker Applied Materials ( AMAT ) is expected late Thursday to report its ninth consecutive quarter of $2 billion-topping sales, and shares rose Wednesday on the pending Q1 report. Intraday on the stock market today , Applied Materials stock was up 2.5%. Shares are down 10% for the year, reflecting an equal drop in IBD’s 36-company Electrical-Semiconductor Equipment industry group. Applied Materials stock closed 2015 down 25%. For Q1, Applied Materials is expected to report $2.24 billion in sales and 25 cents earnings per share ex items, down 5% and 7%, respectively, vs. the year-earlier quarter. The consensus model of 22 analysts polled by Thomson Reuters was in line with Applied Materials’ three-months-earlier guide for a 2%-9% sequential decrease in sales ($2.16 billion to $2.32 billion) and 23-27 cents EPS minus items. Credit Suisse analyst Farhan Ahmad doesn’t expect any surprises when Applied Materials reports late Thursday. In November, CFO Robert Halliday guided to a 7%-13% decrease in silicon systems, flat installation/warranty support and a 5%-15% jump in display sales. “While display could disappoint near term, we expect positive commentary around the OLED (organic light-emitting diode) ramp at Samsung/LG Display,” Ahmad wrote in a research report. He views Applied stock “as the best self-help story” in semiconductors. OLED displays don’t have a backlight and are therefore thinner than traditional LCDs (liquid crystal displays). The material is used in TVs, computer monitors, smartphones and handheld game systems. Applied Materials cushioned itself for macro uncertainty with a $3 billion buyback program, adding an estimated 12 cents EPS minus items accretion in 2016, Ahmad wrote. He forecasts gross margin improvement in the July quarter vs. 42.2% in the past October quarter. Ahmad retained his outperform rating and 22.50 price target on Applied Materials stock. Applied Materials has a middling IBD Composite Rating of 72 out of a highest-possible 99, and trails Cascade Microtech ( CSCD ), KLA Tencor ( KLAC ) and Advanced Energy ( AEIS ) with CRs of 99, 97 and 94, respectively. Lam Research ( LRCX ) is acquiring KLA Tencor, forming a combination that some analysts say could punt Applied Materials from its top chip gear-making spot.