Is Expedia's Room-Night Growth The Biggest Risk To Priceline?

Priceline Group Inc PCLN reported robust Q3 results, handily beating the consensus expectations, with top-line outperformance driven by a strong pickup in room-night growth.

Cantor Fitzgerald’s Naved Khan maintains a Buy rating on the company, while raising the price target from $1,560 to $1,750.

Strong Results

Priceline reported its gross profit, EBITDA and EPS ahead of the consensus expectations, driven by higher-than-anticipated growth in bookings and room nights.

Room-night growth accelerated, improving 500bps quarter-on-quarter to 29 percent, ahead of the consensus forecast of 23.7 percent.

“The improvement was driven by a pickup in Booking.com, which we find impressive considering the scale of the business,” Khan mentioned.

Property growth also continued to be strong, rising 29 percent year-on-year. The company continued to add properties, which rose from 1 million properties in early August to more than 1.07 million properties at present, which the analyst views as positive in terms of selection and bookings growth.

Outlook

However, Khan also pointed out that a recovery in Expedia Inc EXPE's room-night growth poses a risk to Priceline, although this risk appears to be reflected in the latter company’s Q4 guidance of 20–25 percent room-night growth.

Management also guided to gross bookings growth of 16–21 percent, along with continued bookings margin compression in Q4.

In addition, management’s commentary suggests persisting robust momentum, with the underlying growth drivers expected to be sustainable and driving above-market growth in the near to medium term.

Priceline shares rose steadily through November 7, closing at $1,480.33 with a gain of $56.05.

At last check, Priceline was up 3.96 percent at $1,539 in Tuesday's pre-market.