Pat McKeough responds to many requests from members of his Inner Circle for specific advice on buying stocks as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle.
This week an Inner Circle member asked us about the shares of an online travel company. As online bookings grow, Priceline is the clear leader in this field in the U.S. market and its international business is growing as well. Pat examines the company’s expanding number of websites and its growing revenue stream. The shares have risen more than 75% in the past year, and Pat looks at whether they can continue to climb.
Q: What do you think about Priceline? Thanks.
A: Priceline (symbol PCLN on Nasdaq; www.priceline.com), is an online travel company that offers airline tickets, hotel rooms, car rentals, vacation packages and cruises.
Customers can either buy in the traditional, price-disclosed manner or use the company’s ‘‘Name Your Own Price’’ service, which lets them make their own offers. Priceline then collects the offers and matches them against its database of seller inventory.
The company operates the Priceline.com website, as well as Bookings.com, Agoda.com and RentalCars.com. It also bought travel search engine Kayak for $1.8 billion last year. Kayak compiles airline and hotel prices from a number of travel websites and generates considerable traffic for Priceline’s other web sites. It also keeps it from having to depend heavily on Google for search traffic.
In the three months ended December 31, 2013, Priceline’s revenue rose 29.4%, to $1.54 billion from $1.19 billion a year earlier. Excluding one-time items, earnings per share gained 30.1%, to $8.85 from $6.77.
Priceline sees international travel bookings rise by more than 40% in latest quarter
Travel bookings for Priceline increased 38.8%, to $9.1 billion from $6.6 billion in the latest quarter. International travel bookings rose 41.2%, to $7.8 billion, while U.S. bookings gained 26.5%, to $1.4 billion.
Priceline holds cash of $6.8 billion, or $130.52 a share. Its $1.7 billion of long-term debt is a low 2.7% of its $64.0-billion market cap.
The company continues to benefit from rising demand for both travel and online booking—particularly for hotels—domestically and internationally. Steady increases in room nights booked should keep its revenue growing.
Priceline is the leader in the U.S. market, and its international operations are expanding.
In the Inner Circle Q&A, Pat looks at whether Priceline can sustain its growth rate with its expanding international operations. He considers whether its share price can keep rising and concludes with his clear buy-hold-sell advice on this stock.
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Priceline trades at a very rich $1,182 a share. Have you ever bought a stock that was trading at hundreds of dollars a share, or even over a thousand? Did you opt to buy just a few shares? Did the stock reward you with further gains? Have you ever waited for a very expensive stock to split its shares so that you could buy them at a more reasonable price? Did that work out for you?
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