With shares of Priceline.com Incorporated (NASDAQ:PCLN) trading at around $795.73, is PCLN an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
On a day where the S&P dropped 1.38 percent, Priceline only dropped 0.37 percent. This is a sign of resiliency. However, this doesn’t mean Priceline is bulletproof. If the market were to suffer a severe correction, there’s a good chance that Priceline would suffer with it. When the market falls and personal investment gains turn into losses, discretionary income for many people quickly becomes horded. This, in turn, impacts the travel industry. All that said, nobody knows for sure what direction the market will go tomorrow, the next day, or the day after that. That being the case, many investors prefer to focus on quality companies, and Priceline is definitely a quality company. Priceline has also made highly strategic acquisitions through the years. Considering the company’s strong balance sheet, there might be more acquisitions to help fuel growth in the future.
As we all know, Priceline has had no problem with top-line growth. The bottom line has also been impressive over the years, for the most part. And, it should be noted the gross bookings have consistently improved. However, the best way to take a stab at future results is to look at online traffic. If traffic has increased for a company like Priceline, then the odds of improved results also increase. And vice versa. Below is a quick list of properties that might provide some clues. Aside from Global and U.S. ranks, performance numbers are based on the past three months.
Global Rank: 779
U.S. Rank: 160
Pageviews-Per-User: Increased 1.0 percent
Time-On-Site: Increased 6.0 percent
Bounce Rate (only one pageview per visit): Increased 13 percent
Global Rank: 165
U.S. Rank: 402
Pageviews-Per-User: Decreased 2.65 percent
Time-On-Site: Increased 4.0 percent
Bounce Rate: Decreased 2.0 percent
Global Rank: 993
Thailand Rank: 49
Pageviews-Per-User: Increased 17.50 percent
Time-On-Site: Increased 25.0 percent
Bounce Rate: Decreased 24.0 percent
Global Rank: 5305
U.S. Rank: 6818
Pageviews-Per-User: Decreased 14.19 percent
Time-On-Site: Decreased 5.0 percent
Bounce Rate: Decreased 7.0 percent
The Agoda.com numbers are phenomenal. This is important because it has allowed Priceline to compete in Asia. To give readers an idea of the size of Agoda.com, it has 285,000 hotels available for booking, 7 million customers, and it’s available in 37,000 cities across the world. There is also a best price guarantee, and there have been over 4 million reviews left by Agoda customers.
Below are some more directional numbers from the last quarter. These numbers are all year-over-year.
Hotel Room Nights: Increased 36.8 percent
Rental Car Days: Increased 37.5 percent
Airline Tickets: Increased 21.4 percent
Bookings: Increased 36.4 percent
Gross Margins: Increased 747 bps
Agency Business: Grew 6.5 percent
Merchant Business: Grew 43.2 percent
Priceline also recently announced the sale of $1 billion of senior unsecured notes as well as a $1 billion share buyback.
|Operating Cash Flow||1.79B||1.27B||184.56M|
Let’s take a look at some more important numbers prior to forming an opinion on this stock.
T = Technicals Are Strong
Priceline has been one of the biggest winners throughout the broader market over the past three years. That’s saying a lot.
|1 Month||Year-To-Date||1 Year||3 Year|
At $795.73, Priceline is trading above its averages.
E = Equity to Debt Ratio Is Strong
The debt-to-equity ratio for Priceline is stronger than the industry average of 0.50.
E = Earnings Have Been Steady
Priceline usually impresses on the both top and bottom lines.
|Revenue ($) in millions||1,885||2,338||3,085||4,356||5,261|
|Diluted EPS ($)||3.98||9.88||10.35||20.63||0.00|
Looking at the last quarter on a year-over-year basis, revenue and earnings have both improved. On a sequential basis, revenue improved and earnings declined.
|Quarter||Mar. 31, 2012||Jun. 30, 2012||Sep. 30, 2012||Dec. 31, 2012||Mar. 31, 2013|
|Revenue ($) in millions||1,037.25||1,326.76||1,706.31||1,190.64||1,302.01|
|Diluted EPS ($)||3.54||6.88||11.66||5.63||4.76|
Now let’s take a look at the next page for the Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?
Priceline is dealing with a few headwinds at the moment, which include exposure to Europe, regulatory challenges in Argentina, competition in Asia, and slight foreign currency impacts. However, the positives greatly outweigh the negatives with this story. As mentioned earlier, the biggest risk is steep market correction. Priceline isn’t likely to hold up well in such an environment.
Priceline is a solid company, but due to external risks, it’s currently a WAIT AND SEE.
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All content posted should not be considered professional advice. Please do your own research and consult with a professional financial advisor before making any investment decisions. I don’t have any positions in this stock.