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By Brendan Gilmartin

Overview

Priceline.com (NASDAQ:PCLN) is scheduled to report 2Q 2011 earnings after the close of trading on Thursday, August 4, with a conference call to follow at 4:30 p.m. EST. Priceline shares recently touched the highest levels since the tech bubble back in 2000 and will likely see volatile action when it delivers results for the recent quarter.

Outliers & Strategy

  • Key measures:
    • Non-GAAP Earnings Per Share ((NYSEARCA:EPS)): Priceline previously reported both a GAAP and Pro Forma EPS figure. More recently, the company changed to Non-GAAP Earnings Per Share (EPS).
    • Revenues: See comments below regarding revenue guidance. Estimates are at the high end of the company’s range.
    • Adjusted Earnings Per Share Guidance (3Q 2011): The forward outlook is critical for Priceline.
  • Given the recent run-up in Priceline shares, look for Non-GAAP EPS and revenues to come in toward the high end of forecasts. Also note that guidance typically drives the price action in the shares after the results are released.
  • In its prior release, Priceline indicated it expects 2Q 2011 revenue increasing 36% to 41% year over year ($767.44 mln). That would equate to about $1.044 bln to $1.082 bln. The estimate is $1.07 bln. (Source: Yahoo! Finance)
  • Priceline also indicated it sees pro forma net income in the range of $4.70 to $4.90 per share. The current consensus is at the high end of that range at $4.87 (high estimate on the Street is $5.20). The consensus for next quarter is Non-GAAP EPS of $7.94 on revenue of $1.36 bln.
  • Over the previous four quarters, Non-GAAP EPS topped analyst estimates by an average margin of about 10.5%.
  • Sympathy Plays: Expedia (NASDAQ:EXPE), Travelzoo (NASDAQ:TZOO), & Orbitz Worldwide (NYSE:OWW).

Recent News

  • 08/02: Piper Jaffray reiterated an Overweight rating and a $628 price target on Priceline ahead of earnings. Benzinga.com.
  • 07/25: Lazard Capital believes concerns stemming from Europe and weak results from Travelzoo and Orbitz are “overdone.” But in order for the shares to hold up, the firm said Priceline must post EPS of $5.00 and guide for $8.00 in the 3Q. Barron’s
  • 07/12: Susquehanna Financial initiated coverage on Priceline with a Positive rating and a price target of $670, based in part on its global growth prospects (estimated $700 bln opportunity), solid performance at its Bookings.com business in Europe, and profit growth rates. Barron’s
  • 06/30: Citigroup reiterated a Buy rating and a $650 price target on Priceline. Benzinga.com

Technical Review

Priceline shares are off about 6.7% from the recent highs near $550, taking out both the 20-Day SMA, followed by the 50-Day SMA on an intraday basis. Near-term, the 50-day SMA near $515 is a key level to watch as it coincides with recent lows and leads to potential downside risk to $500, followed by $490. Conversely, resistance is at $520, the 20-Day SMA near $530, and the recent peak near $550. (Chart courtesy of StockCharts.com).

Summary

Priceline.com shares have come under pressure in recent weeks amid concerns that softness in Europe and weak string of economic reports in the U.S. could weigh on the shares, while disappointing earnings from Travelzoo & Orbitz Worldwide have many investors erring on the side of caution. Technically, the shares recently breached the closely-watched 50-Day SMA near $515 –a key level to watch headed into earnings. Despite this cautious backdrop, however, Priceline still boasts the online travel industry’s highest growth rate and is benefiting from increased travel and bookings in Asia and Latin America.

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Source: Earnings Preview for Priceline.com