Priceline.com Inc. (PCLN:US), the biggest online travel agency by market value, rose the most in a month after revenue growth in international markets pushed fourth- quarter profit past analysts’ estimates.
Profit, excluding items, rose 26 percent to $349 million, or $6.77 a share, the Norwalk, Connecticut-based company said in a statement yesterday. That compares with the average analyst estimate (PCLN:US) of $6.53 a share, according to data compiled by Bloomberg. Revenue jumped 20 percent to $1.19 billion.
Priceline is racing with smaller rival Expedia Inc. (EXPE:US) to sell hotel reservations in Europe and Asia, where consumers are warming to booking travel online. Expedia, whose growth has lagged behind Priceline’s in recent years, said last month that international sales accounted for almost half of its fourth- quarter sales, a sign of improving growth opportunities abroad.
“It is a combination of more cross-border travel and you’re also seeing more travel from China to Europe,” said Dan Kurnos, an analyst at Benchmark Co., who recommends buying the shares. Also, “Priceline invested in some of the emerging markets first,” he said.
Priceline rose 2.6 percent to $695.91 at the close in New York, for the biggest gain since Jan. 25. The stock has advanced 12 percent this year, compared with a 6.3 percent gain for the Standard & Poor’s 500 Index.
“We can easily see it into the $900s,” Brian Fitzgerald, an analyst at Jefferies & Co., said in an interview. He has a buy rating on Priceline and raised his target price to $820 from $780. “They’re investing in Latin America and Asia. You have secular growth of the Internet, secular growth of smartphones, and Priceline’s getting in there early.”
Priceline has climbed more than nine-fold since the end of 2008, making it the best-returning stock in the Standard & Poor’s 500 Index. The shares are trading at a 64 percent premium (PCLN:US) to the index on a price-to-earnings basis, from a discount four years ago.
The company forecast first-quarter profit, excluding certain costs, of $4.90 to $5.30 a share, compared with $5.10, the average estimate of analysts.
International bookings increased 40 percent to $5.49 billion in the fourth quarter, accounting for 83 percent of total bookings. Most of the company’s revenue outside the U.S. is through Booking.com, an Amsterdam-based business that Priceline purchased (PCLN:US) in 2005. The company also serves Asia through its Agoda business, acquired in 2007.
Priceline said it expects international gross bookings to jump 35 percent to 42 percent in the first quarter, compared with a total bookings increase of 30 percent to 37 percent. The company is contending with a lingering debt crisis in Europe, particularly in travel hotspots Greece, Spain and Italy.
“Given the uncertainty surrounding worldwide economic conditions, particularly in Europe where much of the company’s business is concentrated, the company believes the variability around its guidance is elevated,” Priceline said in the statement.
Priceline and Booking are now both offering services in the U.S. market after the European unit started promoting itself in the U.S. last month. Booking is airing a series of commercials as part of a campaign called “Booking.yeah,” which focuses on getting past the painful elements of traveling and the joy experienced when customers arrive at their hotel rooms.
To expand beyond booking into travel search, Priceline agreed to buy Kayak Software Corp. (KYAK:US) in November for $1.8 billion. The deal is the biggest to date for Priceline and gives the company technology that lets travelers compare prices and make reservations for hotels, flights and cars.
Priceline said in a call yesterday that it’s in the process of obtaining approval from European regulators and expects a vote at the Kayak shareholder meeting next month.
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