Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Near All-Time High, Inc (PCLN) Can Continue to Rally

Page 1 of 2

Over the past decade, as shown by the chart below, shares of the world’s largest online travel booking site, Inc (NASDAQ:PCLN), are up more than 3,000%. However, there are reasons why I believe the rally can continue.

PCLN data by YCharts


Despite trading at an all-time high, as shown by the chart below, Inc (NASDAQ:PCLN) is not trading close to historic highs on a forward PE-ratio basis. This means that, based on historical valuation, Inc (NASDAQ:PCLN) is not expensive.

PCLN Forward PE Ratio data by YCharts

Short Interest

Currently, short interest in Inc (NASDAQ:PCLN) stands at 2.72 million shares or 5.5% of the float. The high short interest indicates that, despite trading at all-time highs, many investors are still skeptical about Inc (NASDAQ:PCLN). If the stock continues to move higher, shorts will likely feel pressure to cover, which can lead to a short squeeze. Inc (NASDAQ:PCLN)


Currently, Priceline has more than $5 billion – or $103.51 per share – in cash. While the company has yet to say what it plans to do with the money, on the first quarter 2013 conference call CEO Jeffery Boyd said:

“And with respect to cash use, we do believe that there will be opportunities in the future to deploy our cash in our international cash in particular either through investing in the business and growing the business or in acquisitions and as you mentioned, I can’t get specific with that. But we do believe there are attractive businesses out there, we have been reasonably acquisitive as a company. … And with respect to other uses of cash as we said before, we have been buyers of our common stock and repurchase from time to time.”

Simply put, I would look for the use of cash going forward as a positive upcoming catalyst. Whether it be an acquisition or a return of cash to shareholders via an increased buyback or dividend, I believe any use of cash will be a positive. Priceline has a long track record of successful acquisitions including

Debt-Financed Buyback

Just days ago, Priceline announced plans to buy back $1 billion of stock. The company is financing the transaction by issuing seven-year convertible notes. I would look for the buyback to put upward pressure on shares.

Improving Economic Outlook

Priceline is poised to benefit from the improving economic outlook as individuals will become more likely to travel. In particular, the rising stock market, which creates a wealth effect, should help the travel sector as a whole.


In my opinion, the biggest risk facing Priceline over the long term is competition. Both Expedia Inc (NASDAQ:EXPE)) and Orbitz Worldwide, Inc. (NYSE:OWW) have proven strong competitors. Currently, Priceline has gross profit margins of 34%. Over time, I think it is possible that margins are driven lower for Priceline because of competition. However, as Priceline CEO Boyd noted, Priceline has done a good job of maintaining its foothold on the market.

“… on the competition question, Expedia is a very strong company and they’ve been competing very aggressively against us for quite some time. Their agency program dates back to the acquisition of Venere, which is many years ago now. So, we think we’ve been doing a decent job in the phase of very robust competition from Expedia.”

As shown by the chart below, over the past three years, Priceline margins have increased while Expedia’s margins have actually narrowed. Of course, it must be noted that the reason why Priceline has significantly higher margins than Expedia is that Priceline focuses on the higher-margin hotel business where as Expedia focuses more on flights.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!