Priceline Earnings Preview: First Quarter 2009

Priceline [[PCLN]] is scheduled to report their first quarter 2009 results before the market opens on Monday, May 11. Based on our analysis, we at are expecting PCLN to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $440.6 million and EPS of $.92. This would represent a 9% increase in revenues from last year’s $403.2 million in the same period. The current analyst consensus estimates calls for revenues of $439.4 million and EPS of $.90. On February 18, the company provided first quarter guidance of 5 – 10% y/y revenue growth ($423M – $443M) and EPS of $.85 – $.95.


Expedia’s [[EXPE]] better than expected first quarter results increases our optimism in Priceline’s ability to do the same. Our checks show that Priceline traffic growth increased much more rapidly than either Expedia or Orbitz [[OWW]] during the quarter. While consumers appear to be cutting back on their travel plans in 2009, Priceline has positioned itself as a value play and is benefiting from both individuals and corporation’s greater focus on reducing costs.


Given the current macro-economic conditions, Priceline did not provide earnings guidance beyond the first quarter. While visibility into 2009 performance remains very poor, we believe that Wall Street’s current consensus of 8% growth in 2009 is certainly achievable.


Share Performance

Since the beginning of the year, Priceline’s shares are up an incredible 35%. In 2008, Priceline’s shares slid 36% as they performed relatively inline with the 34% decline in the Dow Jones industrial average.



Shares are now trading at 14x consensus 2010 EPS estimates. This is a discount to the relative valuations of their peer group. Despite the recent appreciation in Priceline’s share price, we believe that the stock continues to trade at a compelling valuation.


Recommendation: Buy with a $115 price target.


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