Morgan Stanley Thinks Priceline Is Now Worth $1,300

Loading...
Loading...

In a report published Wednesday, Morgan Stanley initiated coverage on Priceline Group Inc’s PCLN stock with an Equal-Weight rating and a $1,300 price target. The target is based on the assumption that increasing room night competition will pressure the company’s top and bottom-line. Expecting lower EPS that the Street, and “slowing growth limiting multiple expansion,” the firm awaits a better entry point.

According to the report, the Street’s figures for 2015 are 3 percent too high. Morgan Stanley projects earnings of $55.77 per share, versus the consensus of $57.71. For 2016, the research firm is modeling EPS of $70.04, versus the Street’s $68.09.

The analysts are also concerned about profitability. They see increased direct competition pressuring Priceline’s top line – “hotel commission rates are under pressure (concessions are rising) leading to lower gross profit per room night, which will decelerate to +1% in '15 and +0.5% in '16 (below +2% in '14).” Moreover, they also expect an adverse impact of competition on the bottom line.

Finally, the specialists go over margins. To put it simply: “margins haven’t risen since 2011, and industry competition is only heating up...Why would they rise now?”

Posted In: Analyst ColorNewsPrice TargetInitiationTravelAnalyst RatingsTechGeneralMorgan Stanley
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...