Priceline Remains An 'Open-Ended Growth Story'

Priceline Group Inc PCLN reported its Q3 results ahead of expectations.

Management’s update on bookable rooms on the platform implies that the company still represents a room share of below 10 percent, suggesting that Priceline “remains an open-ended growth story with a long runway for growth,” Credit Suisse’s Stephen Ju said in a report.

Ju maintains an Outperform rating on Priceline, while raising the price target from $1,750 to $1,790.

Q3 Results

Priceline reported its Q3 gross bookings at $18.5 billion, higher than Credit Suisse’s estimate of $17.0 billion. Gross profit came in at $3.59 billion versus the forecast of $3.4 billion. Adj. EBITDA was $1.9 billion, ahead of the consensus expectation of $1.75 billion and Credit Suisse’s estimate of $1.83 billion.

Priceline delivered a beat on gross bookings, room night growth, revenue and gross profit dollars. “We believe the latter was likely driven by increased spend on performance marketing, as we continue to believe PCLN is a major beneficiary of Google’s rollout of Expanded Text Ads – which has increased click thru rates to provide incremental inventory for many advertisers,” Ju wrote.

Guidance

Priceline’s announced strong Q4 guidance, but even this could prove conservative if there are “sustainable improvement in performance marketing efficiency,” the analyst commented.

Management indicated 24.4 million bookable rooms on the platform, assumed 65 percent occupancy, implying that Priceline continued to have only a 10-percent room share.

In Tuesday's pre-market, Priceline was up 4.3 percent at $1,541.98.