• Stocks
  • Commodities
  • Cryptocurrency
  • Forex
  • Real Estate Investing
  • Other Categories
    • Investing Reviews
    • Business
    • Career
    • Credit
    • Debt
    • Financial Advice
    • Investing
    • Real Estate
    • Retirement
    • Modest Money Facebook
    • Modest Money Twitter
    • Modest Money LinkedIn
    • Modest Money RSS Feed

Modest Money

Personal Finance Blog for Everyday People

  • Breaking Investment News
    • All Investing News
    • Commodities News
    • Currencies News
    • Stock Market News
    • Real Estate Investing
  • Hot Investing Tips
    • Using The Graham Formula to Find Underpriced Stocks
    • Why Dividend Growth Investing Works
    • Understanding Your Place in Bull and Bear Markets
    • How a Catalyst Turns into Dollar Signs
    • The Truth About Binary Options – Legit Trading or Scam?
  • Top Investing Books
    • Top 3 Trading Books
    • The Best Books For New Investors
    • The Top 3 Books on House Flipping
  • Recommended Investing Resources
    • Favorite Resources
    • Ally Invest Review
    • Betterment Review
    • Lending Club Review
    • Personal Capital Review
    • TD Ameritrade Review
    • Financial Product Reviews

How High Can Priceline Stock Reach?

Wall Street analysts had long ago predicted that the stock price of Priceline (NASDAQ: PCLN), the company that showed up around the dot-com bubble era, would stretch to around $1,200 per share. But it blew away all forecasts and topped expectations hitting a new all-time high of $1,400 a share. Today Priceline, the online travel company known for its pitchman William Shatner, has the 4th highest-priced stock in the S&P 500 after NVR, Seaboard and the A shares of Warren Buffett’s Berkshire Hathaway. Is the company’s share price pushing towards $2,000 a share or has it become too high? Can Priceline, the largest online-travel agent by market value, get you a great deal on its stock or is the bargain restricted to travel services?


Priceline’s earnings per share surpassed analysts’ estimates thus far and had only traded in the 4-digit range since October 2014. The high share price keeps it out of reach of the retail investors. EPS estimate for 2015 is expected to be 20x, and that is right around the effective price of the current stock price.

Priceline has perfected a formula for getting more visitors to its Website that increases the quality scores Google uses to order search results. Hence, Priceline doesn’t pay as much as rivals to vie for the top position in travelers’ queries leading more hotels to flock to join its network to access that demand. Thus, a virtuous cycle ensues that leaves plenty of money for the company to return cash to shareholders, to make smart purchases, to innovate and to improve Priceline’s mobile app.

One of the factors that led to Priceline stock’s flirtation with the high nominal price was its execution of one-for-six reverse stock split when the company was in so much trouble in 2003. Although it remained moribund for five years, adjusted for that reverse split, the company hit a high of $974/- making it one of the few hot stocks of the original dot com bubble. Companies do that when their stock price gets into the triple and quadruple digits. Currently, the trend among companies is not to split their stock. Although some of the shareholders began calling for a split and the stock is a prime candidate for a split, the company has no such intention anytime soon. Neither has Priceline’s refusal to split scare away investors.

In addition to the acquisition of Amsterdam-based Booking.com, the leading global platform, the company bought Bangkok-based Agoda.com as well as the travel search engine Kayak Software Corp., the restaurant reservation site Open Table, China’s Ctrip.com and Rentalcars.com that helped them diversify their travel business geographically.

The free cash flow, one-for-six reverse stock split, and their strategy of snapping up companies gives it an optimistic outlook and has enabled the stock to reach the landmark level.

Priceline’s top rivals in the online travel space include Expedia Inc., Trivago, TripAdvisor and Orbitz Worldwide Inc. although they do not enjoy the same success as Priceline. With a market value of $60 billion Priceline dwarfs the competitors.

Even with Europe’s financial crisis, Priceline displayed extraordinary resilience with its overseas business. This vigorous profit growth has placed the company in an elite class of desirable large-capitalization growth stocks that bring premium valuations.

Investors fret about the strong U.S dollar. The travel-booking site gets 70% of its revenue from outside the U.S that is a real source of long-term growth. But U.S dollar remains unyielding against foreign currencies, especially the euro. Therefore, currency headwinds weigh on Priceline’s quarterly results. Priceline’s stellar international growth should ideally offset weakness at home, but the exchange rates for the British Pound and Euro significantly reduce its growth rates when translated into U.S dollars.

The consensus on Wall Street is that the $2,000 mark may not happen anytime soon. Even those optimistic analysts who name Priceline as the top online travel pick targets the price at a maximum of $1,835 which is well short of the $2,000 mark. For Priceline to eventually reach the expected target, it will need to expand its global user base and grow its global market share through its strategic acquisitions. Fortunately, the company is in a superior position to do just that.

Tweet
Share
Pin
Share
+1
0 Shares

How High Can Priceline Stock Reach?

Recent Posts from Modest Money

  • The Actual Reasons Term Insurance Meets Most Parents’ Needs
  • Ford Motors Is Cheap. Is the Stock a Buy Yet?
  • Shaw Communications: High-Yield Canadian Stock Paying Monthly Dividends
  • Only 6 Months Left to Claim PPI
  • The LRS – Liberalized Remittance Scheme
  • GigaFX – How Does it Compare with Other Online Brokers
  • ExxonMobil (NYSE:XOM) is Pretty Cheap, But is it a Good Buy?
  • Could Red Dead Redemption 2 be Killing Market Performance of Take-Two Interactive Software Inc. (TTWO)?
  • Galaxy Next Generation (GAXY) Stock: Leading The Way In Education Technology
  • Five Investments That Preserve Capital, Reduce Risk

December 30, 2015 by Joshua Katz Leave a Comment

Filed Under: All Recent Investing News, All Stock Market News Tagged With: pcln, priceline

About the Author:Joshua Katz

Joshua Katz, CPA is the founder of Universal Tax Professionals, an expat tax and accounting firm serving the needs of Americans living abroad. Joshua graduated from Boston University's School of Management and worked for several large accounting firms before realizing that he could provide his clients better service at lower rates. Feel free to email him directly at josh@universaltaxprofessionals.com.

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Most Popular:

  • Ally investing review
    Ally Invest Review
  • betterment investing review
    Betterment Review
  • Underpriced Stocks Graham Formula
    Top 3 Trading Books Every Trader Should Read
  • Underpriced Stocks Graham Formula
    How to Find Underpriced Stocks Using The Graham Formula
  • Investment Diversification
    Investment Diversification: 5 Risky Mistakes to Avoid
  • dividend growth investing
    Why Dividend Growth Investing Works
  • binary options scam
    The Truth About Binary Options - Legit Trading or Scam?
  • Investing for the Long Term
    Investing for the Long Term: Understanding Your Place in Bull and Bear Markets
  • Should investors buy individual stocks or index funds
    Should Investors Buy Individual Stocks or Index Funds

newsletter

Modest Money Investing News

© 2018 ModestMoney.com – All Rights Reserved.

  • Blog Advertising
  • About us
  • Blogroll
  • Top Finance Blogs
  • Disclaimer
  • Privacy Policy
  • Contact
  • Sitemap