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Priceline Eases Fears Of Global Travel Slowdown, As Did Rivals

Priceline ( PCLN ) stock surged Wednesday after the company reinforced recent statements from online travel rivals Expedia and TripAdvisor that the global economic slowdown was not having a big impact on its business. Priceline also posted Q4 earnings and revenue above Wall Street estimates. Its Q1 sales guidance met views, but its EPS outlook missed at the midpoint. The company said that it expects Q1 sales to rise 9% to 16%, where Wall Street estimates 12.5% growth. The company sees earnings per share ex items rising 10% to 18%, where analysts have modeled 18% growth, to $9.62. Q4 sales rose 9% from the year-earlier quarter to $2 billion, modestly beating Wall Street’s expectations of $1.95 billion. But, as in some past quarters, Priceline’s earnings shattered expectations. The company posted earnings per share minus items of $12.63, up 16% and 83 cents above the consensus estimate of $11.80 by analysts polled by Thomson Reuters. Priceline stock gapped up more than 12% at the open on the stock market today and was up 11%, near 1,235, in afternoon trading Wednesday. Shares have recouped nearly all their losses in the tough 2016. Priceline has an IBD Composite Rating of 77, where 99 is the highest. Expedia stock was up 5% in afternoon trading Wednesday, while TripAdvisor was up 3%. Priceline’s Q4 earnings are hot off the heels of rivals Expedia ( EXPE ) and TripAdvisor ( TRIP ), which both reported last week. TripAdvisor with Q4 EPS and sales that beat expectations, and Expedia with its executives’ comments, eased fears that a slowing global economy was hurting the online travel industry. And in their Q4 earnings conference call, Expedia executives said that currency would be less of  a factor. Priceline’s $12 billion in Q4 also beat analyst estimates. RBC Capital Markets analyst Mark Mahaney said that lower airline fares — thanks to lower oil prices — and lower foreign exchange costs helped travel. Mahaney reiterated his outperform rating on Priceline stock, with a 1,700 price target. On the company’s Q4 earnings conference call with analysts, Priceline CEO Darren Huston praised his workforce. “Being a leader on online travel and building an experienced marketplace isn’t achieved by simply electronically connecting demand with supply,” Huston said on the call. “It may be a surprise to some, but about two-thirds of our employees are working in either the supply or customer service organizations. “The hard work of making this a daily reality is achieved by thousands of dedicated and energetic people around the world having these properties and then working with our partners on an ongoing basis to ensure that our customers have the most choices of places to stay at the best prices available.” Priceline’s ad costs, though, top personnel costs. The company said that its total personnel costs for Q4, including stock options, rose 14% to $312.8 million. The firm said that it spent $582 million on online advertising during the quarter, up 16% from $500 million in the year-earlier quarter. Analyst ‘More Positive’ About Priceline Outlook RBC is “incrementally more positive” on the stock, Mahaney wrote in a research note following the earnings release. He added that both growth and profitability remained strong. “We are more confident that Priceline will generate accelerating growth in 2016,” he wrote, “Thanks in part to foreign exchange stabilization, but also thanks in part to material new growth opportunities that Priceline has been investing in for years.” Mahaney reiterated his thesis from his earnings preview note that Chinese global travel, Latin America, business travel and alternative accommodations would drive Priceline growth. “Alternative accommodations” refers to hotel-like units available via the so-called “sharing economy.” San Francisco-based Airbnb is among the new breed of companies that lets people rent their homes, or just rooms in their homes, to travelers. Investors have valued the privately held Airbnb at more than $20 billion — though the Wall Street Journal and others have recently attacked such lofty valuations for failing to assess the value of shares properly. The WSJ reported that even sophisticated investors such as mutual funds have trouble accurately judging the value of such startups and have had to write down several investments from tech unicorns such as Dropbox and Uber. Priceline’s market valuation is near $64 billion, by far the highest among the 11 companies in IBD’s Leisure-Travel Booking industry group. No. 2 Expedia has a market cap under $17 billion. In the past, Mahaney has called Priceline “well hedged” against the fast rise of alternative accommodations providers such as Airbnb and Expedia-owed HomeAway. Though Expedia executives have said that alternative accommodations have not yet had a “material” impact on its bottom line, Expedia CEO Dara Khosrowshahi recently  told IBD that Airbnb has clearly “grown up” and that the brand has “clearly rung a bell for customers.”  

Paris Terrorist Attacks Likely To Impact Priceline Q4 Earnings

Online travel agency giant Priceline Group ( PCLN ) is set to report its Q4 earnings on Wednesday before the market open, with the global economy in focus. Analysts polled by Thomson Reuters are expecting single-digit sales and earnings gains. The top line is estimated to grow nearly 6% from the year-earlier quarter, to $1.95 billion. Earnings per share minus items are expected to rise almost 9% to $11.80. Priceline stock is up more than 4% in afternoon trading on the stock market today , near 1,106. The company has an IBD Composite Rating of 72, in which 99 is the highest. Like most stocks, Priceline has had a tough year since touching a record high above 1,476 in November. Priceline stock hit a 29-month low of 954 last week. Online travel rival Expedia ( EXPE ) last week said the terrorist attacks in Paris last year did have an impact on Q4 earnings results. Expedia executives, however, said they were confident that foreign exchange would be less of a factor in 2016, which eased investor worries as travel stocks rose. TripAdvisor ( TRIP ), a travel reviews site, last week also released better-than-expected Q4 earnings , further bolstering the sector. But, RBC Capital Markets analyst Mark Mahaney says several factors will contribute to Priceline’s growth in Q4 being “less than usual.” The terrorist attack on Paris in November likely hurt revenue, he wrote in a research note Feb. 12, and Web traffic is slightly lower. Still, Mahaney says that Wall Street estimates are “reasonable.” Citing data from Smith Travel Research, Mahaney wrote that the hotel industry has experienced slightly negative occupancy rates and other key metrics. For Q4, Mahaney forecasts an 8% decline in U.S. bookings but a 23% rise in international bookings. The profit margins of earnings before interest, taxes, depreciation and amortization (EBITDA) might continue to fall, he says. Mahaney reiterated RBC’s price target of 1,700 on Priceline stock, citing three new areas of growth: outbound travel from China and (to a lesser extent) Latin America, and growth in vacation rentals and alternative accommodations. San Francisco-based privately held Airbnb — which investors have valued at over $20 billion (Wall Street values Priceline at over $54 billion) — has pioneered the alternative accommodations category, but as of late has been criticized for its approach to new markets. Critics say “begging for forgiveness vs. asking permission” is an expensive strategy that is unsustainable in the long term. Airbnb spent more than $8 million in San Francisco to fight legislation that would have further tightened regulations targeting firms such as itself and Expedia-owned HomeAway, which also is in the alternative accommodations business. Priceline and Expedia have taken note of Airbnb’s success and are building up competitive offerings.

Big Stock Moves For Techs With Earnings Reports This Week

Loading the player… Several tech companies reporting earnings over the latest week lifted in the stock market Friday as major stock indexes perked 1% to 2%. It’s been a volatile trading week amid a market in correction. Twitter ( TWTR ) vaulted 11% Friday, closing at 15.88 and erasing the week’s losses around its fourth quarter report that showed slowing user growth. It’s tweaking its user interface to be a little more like Facebook ( FB ), which currently gets a top stock rating from IBD: a best-possible Composite Rating of 99. (See the video for who’s highly rated or not, and more on the week’s earnings reports.) Akamai ( AKAM ) lifted 3.3% in the stock market today after surging earlier in the week on its quarterly report. IRobot ( IRBT ) rose 4.6%. Cisco Systems ( CSCO ) and Yelp ( YELP ) gained close to 2% each. Pandora Media ( P ) plunged 12% Friday, amid a declining number of users for the streaming music service revealed in its quarterly report Thursday, plus competition from Apple ( AAPL ), highly rated  Alphabet ( GOOGL ) (with a 99 IBD Composite Rating) and Amazon ( AMZN ) in its business. “Pandora’s core profitability appears challenged by higher royalties and diminishing productivity gains, and its new service efforts appear expensive given the poor history of profits in the space,” Pacific Crest Securities analyst Andy Hargreaves said in a research report. Security firm CyberArk ( CYBR ) fell 10.8% for the day. Travel sites TripAdvisor ( TRIP ) and Expedia ( EXPE ) gave back 1.9% and 1.1%, respectively, on Friday. (Both rose Thursday.)  Tesla Motors ( TSLA ) edged up 0.4% Friday. Before Friday’s action, tech companies whose stocks had lifted this week around their quarterly reports included Cisco, Akamai and TripAdvisor, with big jumps, as well as Tesla and Expedia. On the downside were Pandora, iRobot, CyberArk, Yelp and Twitter. Image provided by Shutterstock .