Morgan Stanley Asks: How Fast Will Priceline Grow Next Quarter?

Priceline Group Inc PCLN reported better-than-expected 1Q16 non-GAAP EPS and accelerated bookings. Morgan Stanley’s Brian Nowak maintained an Equal-Weight rating for the company, with a price target of $1,330.

Strong 1Q Beat But A Noisy 2Q Guide

Apart from recording robust 1Q16 bookings and higher-than-expected non-GAAP EPS, Priceline reported solid ROIs for performance marketing, which were better than the guidance. This indicates that the company’s advertising spend continues to yield results, analyst Brian Nowak commented.

Although the top-end of Priceline’s 2Q total ex-FX bookings growth, of 11-18 percent, was lower than the estimates, the company continues to have relatively high visibility with an average booking window of 30-45 days. Priceline also tends to be conservative, the analyst added.

Priceline’s profitability guidance fell short of expectations. The company guided to 2Q adjusted EBITDA of $740-$795 million. This lower 2Q profitability is expected to be on account of increased branded ad spending on TV ad digital, the Easter shift, continued hiring in the core OTA business and performance advertising spend.

The non-GAAP EPS estimates for FY16 and FY17 have been reduced by 3 percent and 5 percent, respectively. The share-repurchase assumptions for 2016 have been reduced from $2.25 billion to $1.2 billion.