"With accelerating growth, a benign macro environment, and the stock trading in line with the group despite faster growth, we continue to believe the risk/reward in owning PCLN is favorable," writes Goldman's Heath Terry following Priceline's (PCLN +4.9%) Q3 beat. His PT has been raised to $1,260 from $1,200, equaling a somewhat lofty 18x estimated 2014 EV/EBITDA.
Pac Crest's Chad Bartley is just as upbeat - he thinks "low- to middle-20% growth in gross profit and earnings is sustainable for the next two years," and that improving European macro conditions or further U.S. share gains could provide additional upside. Deutsche and JPMorgan also made note of Priceline's share gains, in the U.S. and elsewhere.
Priceline's gross bookings rose 37.5% Y/Y in Q3, nearly matching Q2's 38% clip. The company is guiding for bookings growth to drop to 27%-34% in Q4, but then again, it provided the same bookings guidance for Q3. Revenue growth guidance (19%-26% vs. a 28% consensus) is also conservative; Priceline reported 33% revenue growth for Q3 after guiding for 23%-30%.
International bookings (85% of total) soared 42% Y/Y in Q3, while domestic bookings rose 17% (the highest rate since Q1 2012). Hotel rooms +36%, rental car days +28%, air tickets +8.6% (highest growth rate in years).
Gross margin surged to 42.4% from 37.8% in Q2 and 26.9% a year ago. Online ad spend (much of it going to Google) remains aggressive: it rose 42% Y/Y to $533.2M, and equaled 23% of revenue.