Priceline's Room-Night Acceleration Continues For Q3; Q4 Will Be A Different Story

Priceline Group Inc (NASDAQ: PCLN) delivered a Q3 beat, with a re-acceleration in room-night growth, highlighting further share gains in the United States. However, comps will be tougher in Q4, and a room-night acceleration from Q3 levels is unlikely, Pacific Crest’s Brad Erickson pointed out in a report.

Erickson maintains a Sector-Weight rating on Priceline saying, “[W]e need greater confidence in the sustainability of accelerating room-night growth and improving ad efficiency trends before arguing for significant further multiple expansion.”

Strong Execution

Priceline exhibited strong execution in Q3, delivering a revenue, gross profit and EPS beat. Room-night growth re-accelerated to 29 percent year-over-year, while incremental gross booking dollars per online ad dollar spent improved year-over-year for the third straight quarter.

Priceline has gained share versus Expedia Inc (NASDAQ: EXPE) for the past couple of quarters. Erickson believes Booking.com’s partnership with Tripadvisor Inc (NASDAQ: TRIP)'s Instant Book “has recently amplified share gains versus Expedia.”

Looking Ahead

Management indicated some incremental pressure in Q4. Moreover, Q4 comps are more difficult and room-night growth may not accelerate from the Q3 levels. The analyst added, “Given Expedia plans to drive more paid channel growth in the out-quarter as well as our view that Expedia could join IB at some point, we see potential for some mean reversion.”

At last check in Tuesday's pre-market, Priceline was up 4.37 percent at $1,545. Year-to-date, the stock is up 16 percent.