Priceline Group Inc currently trades at around 15 times earnings forecast over the next 12 months. That’s its cheapest forward multiple since 2010. Add to that the fact that both its rivals Expedia and TripAdvisor trade at a higher multiples.
Investors knew Priceline was available at a bargain. But given the prevailing market weakness, few had the guts to go long.
Priceline Group Inc Shares Jump on Profit Beat
But given the way Priceline Group Inc is reacting in pre-market, it sure looks the stock is about to get re-rated. Shares are up as much as 15 percent after the travel sites operator recorded a better than expected profit, buoyed by a rise in hotel and rental car bookings.
The owner, operator of Kayak.com and Booking.com said before market open Wednesday that net income during the fourth quarter ended December 31, jumped to $504.3 million, or $10 a share, from $451.8 million, or $8.56 a share, in the same period last year. Excluding one-time items, Priceline earned $12.63 a share, easily topping the Thomson Reuters consensus estimate of $11.80 a share. Priceline has beat earnings estimates in 11 of the past 12 quarters.
Revenue increased 9 percent to $2 billion, also above the average analyst projection of $1.96 billion. The firm issued positive revenue guidance for the current quarter and said bookings growth should maintain momentum.
Priceline Group Inc Stock Has Priced in Forex Headwinds
Priceline Group Inc has historically relied on commissions from bookings for growth. And the bulk of its bookings are international bookings. According to company filings, international business made up close to 90 percent of bookings in 2015. As such, the unprecedented rally in the U.S. dollar was bound to hurt. During third quarter results in November, Priceline offered a weak revenue outlook, largely on account of Forex fluctuations.
The stock has since shed over a quarter of its market value. To make matters worse, the weakening of the British pound and the euro made trips to the U.S. more expensive for overseas travelers. However, as things stand right now, it looks like Wall Street has already priced in those headwinds.
Priceline’s Q4 earnings beat comes a week after smaller rivals TripAdvisor and Expedia both posted positive travel trends. The sector looks set for a rebound. And Priceline could lead the pack.
Shares of Priceline closed Tuesday at $1110.68, up 5 percent. The stock is down 13 percent since the start of the year.