Cantor: Priceline Still Worth $1,480

• Priceline Group Inc PCLN shares have gained 12 percent year-to-date, although they are down 3 percent in the past month.
• Cantor Fitzgerald’s Naved Khan maintained a Buy rating for the company, with a price target of $1,480.
• Khan said that the July/August checks bode well for the company’s 3Q performance.

Analyst Naved Khan commented that the intra-quarter checks indicate that hotel room rates in Europe rose ~16 percent Y/Y in July-August, on a euro-denominated basis. This is consistent with the 2Q levels and higher than the 7 percent reported in 1Q.

The growth in rates reflects robust demand for European destinations, driven by local travelers and inflow of foreign tourists. “That said, we expect the Y/Y decline in the euro vs. the USD to be a headwind for reported results,” Khan said.

Checks also indicate that US hotel occupancy and average daily rate [ADR] continue to increase, rising 2.3 percent y/y in July, as compared to 1.6 percent in 2Q, and 5.9 percent Y/Y in August, versus 4.8 percent in 2Q.

Search query interest for Booking.com recorded an improvement of 100bps Q/Q in y/y growth through August-end, based on Cantor’s analysis of data from Google Trends.

Khan commented, “Given Search's importance in Priceline's marketing channel mix, coupled with a strong secular growth trend in mobile bookings, we believe that the company is tracking at/above the high-end of guidance for 23% Y/Y growth (FX-neutral) in international bookings in 3Q:15 (down 700bps from 30% in 2Q:15).”

“Asia-focused Agoda.com, which we estimate represents low double-digit percentage of total bookings, saw Search interest improve ~500bps (to -8% Y/Y QTD vs. -13%Y/Y in 2Q), Khan wrote, while adding that property selection seemed to be growing well across Hotels and Vacation rentals.

Priceline’s shares are down around 10 percent amidst market volatility.