Options Trade – Priceline Group Inc (NASDAQ:PCLN) Calls 
Tuesday, February 17, 2015

**OPTIONS TRADE: Buy the PCLN Apr 2015 1250.000 call (PCLN150417C01250000) at or under $6.50, good for the day. Place a protective stop loss at $2.60 and a pre-determined sell at $11.00.

by Ian Harvey

February 17, 2015

Introduction

Priceline Group Inc (NASDAQ: PCLN), formerly Priceline Com Incorporated, which is an online travel company that offers its customers hotel room reservations at over 295,000 hotels worldwide through the Booking.com, priceline.com and Agoda brands, is scheduled to report its Q4 2014 results on Feb 19th before market hours, with analysts estimating that the company will report Non-GAAP EPS of $10.01 on revenue of $1.8 billion.

Priceline has consistently outgrown its peers and delivered higher earnings growth fuelled by its industry leading profit margins. International gross bookings are the major driver of Priceline gross bookings over the last three years.

A bulk of the international gross bookings growth is driven by booking.com, Priceline's subsidiary in Europe. The strong growth in international gross bookings has seen the international to total gross bookings share rise from 75% in Q1 2012 to 85% in Q3 2014.

Priceline has a strong record of beating its guidance as well as analyst consensus estimates. The company has beaten analyst consensus EPS for over 15 consecutive quarters, highlighting the strength of the company's operations.

Technical Details

Priceline Group has a 52 week low of $990.69 and a 52 week high of $1378.96. The stock has a 50-day moving average of $1058.68 and a 200-day moving average of $1145.

The company has a market cap of $57.548 billion and a price-to-earnings ratio of 23.94.

Earnings

Priceline Group last posted its quarterly earnings results on Tuesday, November 4th. The company reported $22.16 earnings per share for the quarter, beating the analysts’ consensus estimate of $21.11 by $1.05. The company had revenue of $2.84 billion for the quarter, compared to the consensus estimate of $2.83 million. During the same quarter last year, the company posted $17.30 earnings per share. Priceline Group’s revenue was up 25.0% compared to the same quarter last year. Analysts expect that Priceline Group will post $52.57 EPS for the current fiscal year.

For the upcoming report analysts expect Priceline earnings to beat the high end of management guidance on both earnings (range of $9.4 to $10.10) as well as revenue (guided range: $1.7 billion to $1.8 billion). The consensus estimate implies earnings growth of 13% and revenue growth of 16.6% on a YoY basis.

The estimates have been significantly lowered over the last three months as management guided lower citing forex headwinds in particular. The analyst consensus EPS has been lowered by 8.2% from $10.9 on October 14, 2014. The revenue estimate has been lowered by 7% from $1.93 billion on October 11, 2014. The decline in earnings has accelerated through the quarter as the dollar has gained strength against most major currencies in general and the euro in particular.

Analysts Opinions

RBC Capital Markets reiterated their outperform stance on February 06th for Priceline, with a target price of $1300, which represents an upside of 27.15% from the last closing price. Another research firm, Oppenheimer & Co, reiterated their outperform stance on the same day with a target price of $1300. Finally, Stifel maintained their hold stance on February 05th.

Priceline Group‘s stock had its “neutral” rating reaffirmed by Zacks in a research note issued recently. They currently have a $1,064.00 price target on the stock. Zacks‘s price objective would suggest a potential upside of 5.03% from the stock’s previous close.

Zacks’ analyst wrote, “Priceline.com is one of the leading online travel companies in the world. Priceline’s third quarter results exceeded the Zacks Consensus Estimates. However, the forward guidance was disappointing. The secular growth trend in the online travel space, Priceline’s strong position in several markets, growth opportunities in the domestic market, good execution, prudent marketing strategy and strong financial position are likely to drive upside to the shares. Of course, currency issues, macro headwinds, continued investments and occupancy tax-related litigation remain overhangs. We therefore reiterate our Neutral recommendation on Priceline shares.”

The company has been the subject of a number of research reports:-

• Analysts at RBC Capital reiterated an “outperform” rating and set a $1,300.00 price target (down previously from $1,400.00) on shares of Priceline Group in a research note on Sunday.

• Analysts at Zacks reiterated a “neutral” rating and set a $1,064.00 price target on shares of Priceline Group in a research note on Tuesday, February 3rd.

• Analysts at Janney Montgomery Scott set a $1,050.00 price target on shares of Priceline Group and gave the company a “hold” rating in a research note on Monday, January 26th.

• Finally, analysts at Deutsche Bank reiterated a “buy” rating on shares of Priceline Group in a research note on Friday, January 23rd.

Shares of Priceline Group have received a consensus rating of “Buy” from the twenty-five ratings firms that are presently covering the stock. Seven investment analysts have rated the stock with a hold recommendation, sixteen have assigned a buy recommendation and one has issued a strong buy recommendation on the company. The average 12-month price target among analysts that have updated their coverage on the stock in the last year is $1,360.31.

Conclusion

The company is undervalued at the present time and has shown consistent and significant earnings growth over the last several years.

Therefore, based on the facts above the following options trade is recommended…..


**OPTIONS TRADE: Buy the PCLN Apr 2015 1250.000 call (PCLN150417C01250000) at or under $6.50, good for the day. Place a protective stop loss at $2.60 and a pre-determined sell at $11.00.



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