New highs for Priceline (again) on Q4 beat, bookings strength

For the second quarter in a row (previous), Priceline (PCLN +2.5%) has rallied in spite of providing light guidance to go with a beat. The online travel giant has a long history of guiding conservatively, and analysts parsing its Q4 numbers think it's being cautious once again.

Gross bookings once again blew away guidance in Q4, growing 38.8% Y/Y vs. 37.5% in Q3 and a guidance range of 27%-34%. International bookings (85% of total bookings) rose 41.2% vs. 41.8% in Q3, and domestic bookings 26.5% vs. just 16.7%. Officially at least, Priceline expects 23%-33% Q1 bookings growth.

Stifel has upped its PT to $1,500 from $1,250, and sees the strong Q4 hotel room night growth delivered by Priceline (37% Y/Y) and rivals as evidence "Global travel remains in secular growth."

Stifel and others note Priceline's margins are under pressure (op. margin -200 bps Y/Y) as the company continues ramping marketing spend (ad spend rose 36% to $427M), but they add the Q4 decline was smaller than expected.

Evercore has hiked its 2014 bookings growth forecast to 32% and 28%. But it's only raising its gross profit forecast by 2%, due to a belief higher-margin opaque inventory deals will keep declining as a percentage of sales.

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Comments (1)
  • glacier32
    , contributor
    Comments (63) | Send Message
    It's not clear to me how much US gross booking growth is due to Kayak. Kayak could use PCLN to fill air tickets the business of which has large gross booking but low margin (this might also be the reason why profit margin is going lower in Q1.). It is important to make such distinction so we could gauge whether the growth of the red-hot hotel business is peaking or not.
    22 Feb 2014, 12:53 AM Reply Like
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