Priceline.com's (PCLN) first quarter results easily blew past consensus estimates, and management's guidance for 2008 was equally bullish. The strength in Priceline.com's international business and operating expense controls continue to drive the company's impressive results.
What's more, we think the company is well-positioned to weather a slowdown in consumer spending due to the value proposition it offers customers. Still, we wouldn't chase the shares here, as they trade at over 25x our 2008 EPS estimate. That is a pricey multiple in the current market.
We have been bullish on PCLN shares since we upgraded the stock in January of 2006, when it was trading around $22 per share. However, we think the stock, which is now trading around $140, is fairly valued. We think it is appropriate to go with a neutral stance.
For the second quarter, Priceline.com expects revenue growth of 35%-40%, pro forma gross profit growth of 55%-60%, pro forma EBITDA of $80-$90 million, and pro forma net income of $1.25-$1.40 per diluted share. For full-year 2008, Priceline.com expects $7.5-$7.9 billion in gross travel bookings, pro forma EBITDA of $340-$365 million, and $5.25-$5.65 of pro forma net income per diluted share.
Priceline.com shares look fully valued at current levels. The stock trades at 25.6x our 2008 EPS and 21.6x our 2009 EPS estimate. Using our 2009 estimates, the stock is trading in-line with our estimate of Priceline's long-term earnings growth rate. While we don't expect Priceline to disappoint in the near term, we would wait for a pull-back in the stock before becoming more bullish on the shares. We maintain our Hold rating. Our target price is $142, or about 26x our 2008 EPS estimate.
Read the full analyst report on PCLN.
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