Priceline (PCLN): Shares growth and value characteristics

By Paul Goodwin, Analyst, Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 10/2/13 Sign up for free Cabot Wealth Advisory

My second pick is Priceline (PCLN), the travel and lodging discounter whose message has been drilled into our heads for years via its celebrity spokesman William Shatner and his TV ads. (If you missed my first growth/value discussion, you can view it here.)

Here’s what Cabot Top Ten Trader had to say about Priceline in its latest appearance on July 1, 2013.

“Priceline (PCLN 841)—With the July 4th holiday just around the corner, summer travel is in full swing. What’s more, the current economic environment heavily favors discount travel booking firms like Priceline.com. In addition to the company’s improved outlook for summer travel, Priceline has been front and center for investors after acquiring red-hot competitor Kayak Software—an online booking firm that aggregates deals from other online travel websites into one set of search results. Priceline expects to create synergies with Kayak that will grow its international presence, while helping Kayak expand its reach in the U.S. Despite global economic pressures, Priceline’s bottom line has held firm. In fact, the company has increased its revenue and profit margin year-over-year since 2009. Priceline has also put up impressive numbers during the past year, with revenue growth averaging 21% on a year-over-year basis, while earnings have risen by an average of 32% on the same basis. Lastly, despite the stock’s lofty heights, Priceline is still relatively undervalued when compared to its peers. Priceline sports a P/E ratio of 28.93, roughly 20 points lower than its leading competitor Expedia. With wanderlust affecting quite a few travelers this summer, we believe Priceline is well positioned to lead investors higher.

“While other stocks were sinking, PCLN held its ground in 2011, with shares finding firm support near 450 despite turmoil on Wall Street. In 2012, PCLN rallied sharply higher, topping out just shy of 800 by late April. But the stock was unable to hold its lofty perch, ultimately pulling back for a retest of support near 550 by mid-year. Undaunted, PCLN resumed its trek higher, gaining strength in early 2013 as the Kayak acquisition was approved. Now PCLN sits perched in all-time high territory around 840. You can nibble here, or take larger bites on pullbacks toward 800. A stop at the stock’s 50-day moving average near 779 makes sense.”

It’s worth noting that Priceline, which was trading at 841 when this issue of Cabot Top Ten Trader came out, has now edged above 1,000. This move has pushed PCLN well above the 810–840 buy range Cabot Top Ten Trader recommended for buying the stock.

Priceline is still on page 12 of Cabot Top Ten Trader because it has kept its momentum, which is what great growth stocks do.

So should you buy PCLN here?

Well, I’m a growth guy, so I’d probably say yes to buying a little. The stock has outrun the maximum buy price set by Roy Ward in Cabot Benjamin Graham Value Investor (714.48), but hasn’t yet reached the minimum sell price (1097.81). So it should have farther to run. And since the stock is still on page 12 of Cabot Top Ten Trader, it still has some price appreciation.

To my mind, PCLN is a low-risk proposition. If you’re looking for a screaming growth stock, it’s probably a better idea to get fresher names, which means growth stocks earlier in their rallies. And value investors should look for stocks that represent better bargains.

Still, when a company like Priceline makes 23 appearances in Cabot Top Ten Trader since its debut in October 2006, (when it was trading at 41), that’s an indication of long-term strength that’s hard to match.

Ultimately, what’s to be learned from this list of stocks that share growth and value characteristics is that the most important decision you can make as an investor in individual stocks is about yourself: Are you a growth investor or a value investor?

If you are interested in value stocks, than Cabot Benjamin Graham Value Investor is the publication for you. For details, click here.

If you are growth stocks investor, than Cabot Top Ten Trader will give you 10 momentum stock ideas delivered to your inbox each week. For details, click here.

Priceline.com (PCLN): Featured in Cabot Top Ten many times

By Elyse Andrews, Editor of Cabot Wealth Advisory
From Cabot Wealth Advisory 1/29/11 Sign up for free Cabot Wealth Advisory e-newsletter

Priceline.com (PCLN) has been featured in Cabot Wealth Advisory many times. This is what Mike wrote about Priceline in Cabot Top Ten Weekly in mid-November …

“Priceline.com remains one of the handful of liquid (i.e., very well-traded and institutionally owned) leaders of this bull move, and the reason is obvious—business is very good and continually outpaces even the most bullish forecasts. Last week, the company continued that trend by putting up another round of outstanding numbers, and the under-the-hood metrics were also impressive—gross travel bookings leaped 47% from the prior year, international revenues surged 67%, hotel bookings leaped 54% and the firm’s newly acquired rental car unit sales nearly doubled! Domestically, growth is slower but steady, and management has been pushing all the right buttons in positioning its brand around the world. Analysts significantly hiked their outlooks following the earnings report (next year’s earnings estimate is now $17.53 per share, up from $15.45 one month ago), which would mark a healthy 33% hike from 2010. We like it.

“PCLN hasn’t gotten many headlines and the stock isn’t the hottest thing on the planet. Nevertheless, shares remain in a firm uptrend, and as you see on this weekly chart, have barely had any hiccups since the summer. Last week’s earnings gap was solid—shares rose 8% on nearly triple average volume—but not so powerful that we think it’ll be all up from here for PCLN. A pullback of a few percent is possible, and would be buyable if it comes.”

After the write-up, PCLN meandered for nearly two months before taking off on big volume at the beginning of January. Earnings are out in mid-February, so watch closely to see how the stock reacts. Click here for more information.



Priceline.com (PCLN): Liquid leader of this bull move

By Elyse Andrews, Editor of Cabot Wealth Advisory
From Cabot Wealth Advisory 11/20/10 Sign up for free Cabot Wealth Advisory e-newsletter

If you are looking for a stock in the travel arena though, I have one for you today: Priceline.com (PCLN), which was recently recommended in Cabot Top Ten Weekly by Editor Michael Cintolo:

“Priceline.com remains one of the handful of liquid (i.e., very well-traded and institutionally owned) leaders of this bull move, and the reason is obvious–business is very good and continually outpaces even the most bullish forecasts. Last week, the company continued that trend by putting up another round of outstanding numbers, and the under-the-hood metrics were also impressive—gross travel bookings leaped 47% from the prior year, international revenues surged 67%, hotel bookings leaped 54% and the firm’s newly-acquired rental car unit sales nearly doubled! Domestically, growth is slower but steady, and management has been pushing all the right buttons in positioning its brand around the world. Analysts significantly hiked their outlooks following the earnings report (next year’s earnings estimate is now $17.53 per share, up from $15.45 one month ago), which would mark a healthy 33% hike from 2010. We like it.”

“PCLN hasn’t gotten many headlines and the stock isn’t the hottest thing on the planet. Nevertheless, shares remain in a firm uptrend, and have barely had any hiccups since the summer. Last week’s earnings gap was solid—shares rose 8% on nearly triple average volume—but not so powerful that we think it’ll be all up from here for PCLN. A pullback of a few percent is possible, and would be buyable if it comes.”

Click here to learn more about PCLN and other leading stocks recommended by Cabot Top Ten Weekly.



Elyse Andrews Elyse Andrews


Editor of Cabot Wealth Advisory
 
Elyse Andrews edits Cabot Wealth Advisory, a free email newsletter that offers independent, no-nonsense investment advice on how to build long-lasting wealth written by Cabot’s analysts and editors. Every Saturday, Elyse writes the Weekend Digest, which includes her column and a summary of Cabot Wealth Advisories that readers may have missed during the week. Elyse is also a regular contributor to The Iconoclast Investor, a blog for Cabot editors and readers to share their views and interact with each other.