Analysts Optimistic On Priceline's European Market, Booking.com
On Thursday, Priceline.com Incorporated (NASDAQ: PCLN) reported fourth quarter and full-year 2013 results following the market close.
Fourth Quarter Results Summary
- Priceline.com reported Q4 EPS of $8.85 versus the estimated $8.29, beating by $0.56. EPS were up 31% from the same quarter last year.
- Revenue came in at $1.54 billion versus the estimated $1.52 billion.
- Management reported that International operations contributed $1.15 billion in gross profit in the 4th quarter, or 38% increase versus a year ago.
Full Year Summary
- Priceline.com had $39.2 billion travel bookings, a 37.7% increase compared to 2012.
- Gross profit increased 40% from 2012 to $5.7 billion in 2013.
- Management reported that International operations contributed full-year gross profit of $5.02 billion, a 41% increase versus the prior year.
- The company is looking for Q1 EPS of $6.35-6.85 versus $7.11 analyst estimate.
- Priceline.com estimates a 23%-33% in a year-over-year increase in total gross travel bookings.
- Management estimates a 25%-35% in a year-over-year increase in international gross travel bookings.
- The company is looking for a 15%-20% increase in year-over-year increase in domestic gross travel bookings.
- Analyst Scott Devitt from Morgan Stanley maintained an Overweight rating and raised the price target from $1.32K to $1.45K. Morgan Stanley noted that domestic bookings growth is accelerating and Booking.com "offers a strong value proposition to hotels." Devitt commented, "We believe Priceline can outperform consensus estimates as it continues to post strong organic international bookings growth and fears of margin degradation dissipate.
- Bank of America analyst Justin Post maintained a Buy rating and raised the price target from $1.30K to $1.40K. Post commented, "Priceline has a strong leadership position in the European travel market and has the opportunity to leverage its Booking.com brand and business model to gain traction in North America, Asia and Latin America. We think Priceline deserves a premium multiple to the S&P 500 given a strong market penetration opportunity for Online bookings."
- Analyst Tom White from Macquarie maintained an Outperform rating and raised the price target from $1.38K to $1.50K. White reported, "The decision to launch a brand campaign in Booking.com's core European market may cause debate, but we believe the move is more a function of the positive impact seen from U.S ad tests. and less a response to competitive pressure. In fact, that PCLN could accelerate 4Q room night growth to 36.5% in the face of better execution from its largest competitors (and vs. EXPE's 25%) highlights to us that the online hotel market is still not a zero-sum game (and is likely far from it). This sector will undoubtedly remain competitive, but given PCLN's continued strong execution, stability in its more mature markets, and large under-penetrated opportunities in new geos, we believe the large scale operators and PCLN in particular can maintain overall high levels of growth."
- Benchmark analyst Daniel Kurnos maintained a Buy rating and raised the price target from $1.20K to $1.55K. The analyst noted that Europe is seeing signs of recovery with improved results at Bookings.com internationally. Kurnos wrote, "We believe Priceline continues to make headway with its ExpressDeals semi- opaque platform, which partially helped drive continued domestic acceleration in room-nights, leading to 26.5% domestic gross bookings growth. Per haps more importantly, however, Booking.com appears to be gaining consistent traction in the North American market where it has historically struggled. Although domestic growth is likely to slow in 2014, we still anticipate Priceline could record double- digit booking growth through a combination of market share and supply gains."
- Analyst Ross Sandler from Deutsche Bank maintained a Buy rating and raised the price target from $1.24 to $1.425K. Deutsche bank reported, "The company continues to execute near-flawlessly, with key international bookings growth re-accelerating to +42% ex-FX despite a 200bps tougher comp. More importantly, PCLN online marketing is leveraging on Kayak synergies, improving ROI and improving ADR, for the second quarter in a row. We continue to view PCLN as one of the best ways to play global online travel, and are increasing our estimates modestly, mostly on higher EBITDA/GP margins."
- S&P Capital IQ analyst Scott Kessler maintained a Hold rating and $1.1K price target. Kessler commented, " We do not think it is widely known that well over half of PCLN's gross bookings, rev- enues and operating profits are derived from in- ternational businesses (mostly focused on Eu- rope). Although we have concerns related to Europe, we think positive secular trends are in- tact, such as a growing percentage of travel purchases being made online. PCLN hopes it can replicate its European success in Asia, with Agoda (which was acquired in 2007) and an alliance with Ctrip (CTRP) announced in Au- gust 2012. We think PCLN is strongly positioned and well managed."
Shares of Priceline.com closed at $1,283.00 on Thursday. Priceline is currently up 2.71% at $1317.73.
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