Historically, Priceline's Guidance Doesn't Align With Reality

The recent CEO shift seems to have resulted in an “overly conservative” guidance for bookings and operating margins by Priceline Group Inc (NASDAQ: PCLN), Piper Jaffray’s Michael J. Olson said in a report. He reiterated an Overweight rating for the company, with a price target of $1,500.

Priceline Guidance Typically Low

Priceline’s guidance has typically not aligned with reality, analyst Michael Olson commented. He added that the company is “unusually conservative around macro events and internal shifts.” Taking the past 30 quarters into account, Priceline’s bookings growth has been ahead of the pre-guidance consensus expectations in 27 of the quarters.

“In fact, since 2013 pre-guidance consensus has been 16% more accurate than Priceline's own guidance,” Olson wrote. He further pointed out that of the five times that Priceline had guided the high-end of bookings growth below consensus: “in three quarters the company outperformed pre-guidance expectations, in one quarter estimates mis-modeled currency, and one quarter was a legitimate miss.”

The analyst commented that Priceline had guided to 800bps-1,500bps deceleration in FXN bookings growth for the most recent quarter, which appears overly conservative. Moreover, Priceline may also beat its guidance of 575bps of operating margin deleverage.

“Constant conservatism ultimately tends to depress LT EPS estimates and, therefore, PCLN may be trading at an even steeper discount to actual 2017E EPS,” Olson added.