Priceline Downgraded by Goldman, Stock Down 3% - Analyst Blog

Shares of online travel booking company, Priceline.com (PCLN) fell a little over 3%, touching a low of $1045.25, before closing a notch higher at $1045.84. The decline came after the travel company was pulled out from the "Americas Conviction Buy List” by investment firm Goldman Sachs (GS) citing foreign exchange rate concerns.

Goldman Sachs anticipates that macroeconomic headwinds due to multiyear declines in euro's value will likely hinder the performance of the stock. Therefore, this resulted in Priceline's exclusion from the regional Conviction Buy List. Priceline was added to the list on Nov 20, 2013.

According to PhoCusWright, online travel booking in Europe is growing at a faster rate than in the U.S. with significantly higher penetration rates. Priceline is very strongly positioned here (Booking.com has 31% share compared to Expedia's 15%).

The foreign exchange volatility around the world remains a primary concern. Due to Priceline's strong position in Europe, the rising dollar against the euro will negatively impact sales and earnings of the company in the near term. Moreover, the macroeconomic pressures and weak consumer spending environment in Europe will also hurt Priceline's business.

However, Goldman maintained its "Buy" rating with a price target of $1,400 on the stock.  It is optimistic about Priceline's dominance and growth prospects in the strengthening online travel agency (OTA) market aided by mobile usage and metasearch.

Priceline has been steadily building positions in emerging international markets. It is not only increasing its hotel inventories but also entering into strategic alliances and making acquisitions that could contribute to growth in the future.

The company's international business continues to do very well while the domestic business is being helped by deals, promos, prudent marketing, partnerships and acquisitions.

It reported strong results in the third quarter with earnings exceeding the Zacks Consensus Estimate on revenues that were in line.

Priceline shares currently carry a Zacks Rank #3 (Hold).

Meanwhile, one can consider better-ranked players from the same industry like Geeknet, Inc. (GKNT), Mercadolibre, Inc. (MELI) and Overstock.com Inc. (OSTK). While Geeknet sports a Zacks Rank #1 (Strong Buy), Overstock and Mercadolibre carry a Zacks Rank #2 (Buy).

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