Inc (PCLN) Strong 4Q13 Lead To Increased Estimates


Raymond James analysts Aaron Kessler and Ben Cohen use their analytical powers to focus on Inc (NASDAQ:PCLN)’s 4Q13 results, maintaining their Outperform rating on the company.

Priceline reported strong 4Q results Inc (NASDAQ:PCLN) reported strong 4Q results driven by 42% forex neutral international growth and accelerating domestic bookings. We reiterate our Outperform rating given our view of: 1) continued bookings strength and market share gains; 2) approximately 20% long-term EPS growth; and 3) valuation is attractive (20x our 2015E non-GAAP EPS). We also increase our price target to $1,500 (23x 2015E non- GAAP EPS)

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4Q13 highlights: International bookings of $7.75 billion increased 42% y/y forex neutral (vs. 41% y/y in 3Q) while Domestic bookings of $1.38 billion increased 26.5% y/y (vs. 17% y/y in 3Q). Gross profits of $1.33 billion increased 39% y/y vs. guidance of 32-39%. Non-GAAP EPS of $8.85 was above our/consensus estimates of $8.16/$8.31.

Positives: 1) Improved Advertising Leverage – advertising expenses as a percent of gross profit declined 50 bp y/y (in part due to Kayak improving online ad efficiency) 2) International Momentum – International revenue growth of 42% forex neutral exceeded guidance of 28-35% and accelerated from 41% in 3Q driven by strength in Europe, APAC, and South America. 3) Domestic Bookings – accelerated to 26.5% y/y (vs. 17% y/y in 2Q), as Priceline noted share gains domestically for Inc (NASDAQ:PCLN) driven strength in air, rental car, and hotel verticals, as well as increased advertising placement within Kayak.

Negatives: 1) 1Q Guidance: Inc (NASDAQ:PCLN) guided below consensus at the midpoint for both gross profits and non-GAAP EPS, largely due to the Easter shift as well as increased offline marketing in 1Q (Priceline noted brand spend in the U.S. , Canada, and UK).

Guidance Inc (NASDAQ:PCLN) guided 1Q14 domestic gross bookings growth of 15-20% y/y (vs. our previous estimate of 15.2% y/y), and forex neutral international gross bookings growth of 25-35% y/y (vs. our previous estimate of 30.8% y/y). Additionally, Priceline guided for gross profit growth of 22-32% y/y (vs. our/consensus previous estimate of 35%/31% y/y) and non-GAAP EPS is $6.35-6.85 vs. our/consensus previous estimates of $7.26/$7.27.


We are increasing our estimates given the strength in 4Q and improved domestic growth rates. Our 2014/2015 revenue estimates increase by 1.4% and 1.7% while our EBITDA estimates increase by 2.8%/3.2%. Our non-GAAP EPS estimate for 2014 moves from $51.42 to $52.79 while our 2015 estimate moves from $63.14 to $64.93.


Our $1,500 target price is based on 23x our 2015 non-GAAP EPS estimate of $64.93, in line with its two-year historical range of ~16-24x. We believe a multiple towards the higher end of the range is warranted given PCLN’s continued momentum, positive industry data, and likely upside to estimates.