OpenTable Write Down Wasn't Too Material To Priceline's Overall Business

Ascendiant Capital Markets maintains its Buy rating on Priceline Group Inc (NASDAQ: PCLN) as continued strong hotel growth and international momentum led to better-than-expected results for the third quarter.

Also, the brokerage said the $941 million OpenTable write -down is not material, as it represents only a small fraction of Priceline’s overall business. Priceline, which paid about $2.6 billion for OpenTable in 2014, has decided to scale back expansion plans for its OpenTable dining service.

Q3 And Q4 Guide

Following is a gist of Priceline’s third-quarter results:

• Pro forma EPS $31.18 versus Ascendiant estimate of $30.32, consensus of $29.32 and guidance of $28.30–$29.80.
• Revenue $3.69 billion versus Ascendiant estimate of $3.60 billion, consensus of $3.62 billion and guidance of $3.48–$3.63 billion.
• Gross bookings rose 25 percent to $18.5 billion, topping Ascendiant estimate of $17.6 billion and guidance of $16.8 billion–$17.6 billion.

Priceline, which had another strong quarter with a strong summer travel season, saw 29 percent growth in room nights.

For the fourth quarter, the company guided pro forma EPS of $12.20 –12.80 and gross bookings growth of 16–21 percent.

“We believe that guidance is conservative given its recent positive momentum (and beating its own guidance every quarter in 2013, 2014, 2015, and so far in 2016) and the overall positive travel industry,” analyst Edward Woo wrote in a note.

Bottom Line

That said, Woo acknowledged that the growth rates should trend lower given Priceline’s scale and large F/X exposure. But, he noted that Priceline should carry forward its high growth and strong momentum, despite moderating, into 2017.

As such, the analyst raised his 2016 estimates for revenue to $10.77 billion from $10.54 billion, and for EPS to $68.70 from $68.17.

Shares of Priceline closed Monday’s trading at $1,480.33. In the pre-market hours Tuesday, the stock was up 4.71 percent to $1,550.00. Woo also hiked his price target to $1,700 from $1,600.