MKM Partners: Priceline Has Strong Fundamentals, But Wait For Bookings Growth, Better PE Ratio

The start of a new era for Priceline Group Inc PCLN is in sight ahead of the company’s fourth-quarter earnings. The online travel agency will change its name to Booking Holdings and trade under the new ticker symbol BKNG beginning Tuesday.

Ahead of the earnings report, MKM Partners said it views consensus estimates for Priceline as accurate.  

The Analyst

MKM Partners analyst Rob Sanderson maintains a Neutral rating on Priceline with a $1,850 price target.

The Thesis

“We think that PCLN is a dominant winner in a large and important internet vertical, but remain on the sidelines, with the stock at the midpoint of its post-recession valuation range and bookings growth at all-time lows and likely to decrease in our view,” Sanderson said in a Monday note. 

Bookings growth could continue to be pressured based on reports from two meta-search providers that spending from Priceline decreased by 10 to 15 percent in the fourth quarter, the analyst said. 

This move is seen as positive in long term, but the lower allocation to performance channels will be deflationary in the short term, Sanderson said. 

“We are not concerned with the fundaments of the business. We do see some cyclical tightness on supply, particularly in the U.S., which is a smaller, but growing market for the overall company."

Consensus estimates are reasonable, Sanderson said, adding that he does not favor the stock setup ahead of earnings, preferring to wait for greater visibility on a rebound in bookings growth.

Price Action

Priceline shares were down 0.2 percent at $1,903.25 Monday afternoon. 

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