Sunday, February 15, 2009

Citigroup Maintains Buy on Priceline Into Earnigs

The shares are up 55% since November while the shares of its main competitor Expedia has languished. I am still calling for a transaction between the two companies this year as the travel environment becomes more challenging.


From Analyst Mark Mahaney:
PCLN Will Report Q4 Results On 2/18 After The Close - We are looking for $1.36B in gross bookings, $383MM in revenue, and $1.03 in proforma EPS vs. the Street at $378MM in revenue and $1.05 in proforma EPS.

Tough Comps, Recession and FX Headwinds... Expect Cautious Q1 Outlook - Against a recessionary backdrop and legitimate concerns about consumer discretionary spending in travel, we anticipate PCLN's outlook for Q1 to be fundamentally cautious. The company has already stated that it will not provide full year guidance (a departure from the past), and negative ADR and FX trends in Europe remain material headwinds. We expect PCLN to report 26% Y/Y int'l bookings growth in Q4 (ex-FX), vs. 45% in Q3, and may actually guide to flat or negative int'l bookings growth in Q1 (mid teens growth ex-FX).

We believe the market will be especially sensitive to PCLN's guidance for European fundamental trends this quarter, given growing signs of cyclical deterioration in Europe (~60% of PCLN bookings).

Reiterate Buy and $83 PT - Based on 1) PCLN's sustainable business model advantages in Europe (large installed base & low-cost agency model); 2) PCLN's defensive hedge in the U.S. market based on trade-down, deep-value Name-Your-Own-Price travel offering; and 3) PCLN's reasonable current valuation (9X '09 EBITDA with a 7% FCF yield), esp given the company's long-term growth outlook.

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