BofA: Priceline Remains A Second-Half Story

Priceline Group Inc PCLN, which reports fourth-quarter earnings and changes its name to Booking Holdings on Tuesday, remains a second-half story, according to a report from Bank Of America Merrill Lynch. 

The Analyst 

BofA's Justin Post maintains a Buy rating on Priceline with a $2,040 price target.

The Thesis

Based on Expedia EXPE's recent top-line results and Trivago NV - ADR TRVG commentary, Post said he expects Priceline to meet or beat on bookings, room nights and EPS estimates when the company reports its Q4 earnings  Tuesday.

The key question surrounding Priceline is whether the impact from its ad spending shift to longer-duration branded TV ads will drive top-line growth this summer, the analyst said. 

“We think the branded spend will drive acceleration or be cut as 2018 progresses," he said. 

2018 is expected to begin with slower top-line growth and margin headwinds from increased investments during a seasonally slower first quarter, Post said. 

BofA projects a potential growth acceleration opportunity in 2018 if additional brand advertising spending drives direct traffic growth; if Priceline's alternative accommodation business gains traction; or if search cost inflation stalls from less metasearch competition.

“We think optimism on [second half] growth acceleration will increase as the year progresses, driving a higher valuation multiple an we maintain our Buy rating,” the analyst said.

Price Action

Priceline shares were down slightly at $1,905.64 at the close Monday. 

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