Ascendiant Thinks Priceline's 10% Selloff Is Unwarranted

Ascendiant Capital’s Edward Woo believes the 10 percent decline in the share price of Priceline Group Inc (NASDAQ: PCLN) followings its 1Q results was unwarranted, and the share price is likely to recover as the company continued to outperform.

The analyst maintains a Buy rating on Priceline Group, while lowering the price target from $1,625 to $1,600.

“We note that Priceline has consistently beat its guidance over the past several years and we believe it will continue to do so for the near term,” Woo said, while mentioning that the current stock valuation was attractive.

1Q Beat

Priceline reported revenue of $2.15 billion with pro forma EPS of $10.54 for 1Q. While the former was marginally below the estimate, both metrics beat the consensus expectations and the guidance.

Related Link: Credit Suisse On Priceline: You Have To Spend Money To Make Money

Hotels growth was strong at 31 percent year-on-year, in terms of room nights, while rental cars days came in at a robust 11 percent year-on-year growth.

“The company’s results were helped by the shift of Easter into Q1, which partially explains the weaker Q2 guidance,” the analyst noted.

2Q Guidance

Woo pointed out that the 2Q guidance was weaker than expected, with revenue growth expected at 7–14 percent year-on-year. Both the revenue and EPS guidance were below consensus.

According to the Acendiant report, Priceline “plans to increase investment spending, in its core business, OpenTable and Kayak along with its other businesses.”

Woo believes the guidance was conservative, given the positive momentum witnessed by the company in recent times and the positive overall travel industry.

The revenue and EPS estimates for 2016 have been lowered.