5% Room-Night Beat Confirms Priceline's Long-Term Story

Priceline Group Inc PCLN reported strong Q3 results, higher than consensus expectations. The company delivered another room-night beat, which confirms that Priceline’s long-term thesis is intact, Benchmark’s Daniel L. Kurnos said in a report.

Analyst Kurnos maintains a Buy rating on the company, while raising the price target from $1,600 to $1,800.

Strong Results, Healthy Guidance

Priceline delivered a 5 percent beat on room-night [RN] growth and an EBITA upside of $90 million. The company announced healthy Q4 guidance. Although management indicated a $940 million impairment charge related to OpenTable, this was more than offset by expectations of core momentum continuing in Q4.

“We continue to view Priceline as a leading innovator in an evolving, healthy growth industry, with sustainable mid-teens or better revenue and cash flow growth,” Kurnos commented.

RN Growth

Priceline reported an acceleration in room-night growth to 29 percent, from 24.5 percent in the prior quarter. The growth came ahead of the consensus estimate of 24 percent, “likely driven by a combination of domestic traction at Booking.com and accelerating growth at Agoda,” the analyst noted.

Although growth would likely moderate over the next five quarters, “we are incrementally more optimistic that marketing ROI pressure will be less than anticipated, and that bookings/revenue momentum can continue at a mid-teens pace regardless,” Kurnos added.

At last check, Priceline was up 7.07 percent at $1,585.01.