Priceline Q3 2015 Preview: Strong Momentum Expected To Continue, Though Currency Headwinds Might Dampen Growth

November 6th, 2015 by Trefis Team
PCLN: Priceline Group logo
PCLN
Priceline Group

Priceline Group (NASDAQ:PCLN) is slated to release its Q3 2015 earnings on November 9th. The company has delivered a robust first half with the aid of strategic investments and technological developments. Priceline’s North America based restaurant booking website, OpenTable, delivered double-digit growth in Q2 and is poised for international expansion. Priceline’s recent acquisition of Australia based restaurant booking website, AS Digital, will help expedite the process. The company’s metasearch engine is growing steadily and recently entered into an alliance to display HomeAway’s vacation rental properties on its website. Priceline is aggressively building its presence in the Chinese and Latin American markets. Priceline’s Booking.com is aiming for stronger growth and is specifically targeting the China market, along with the U.S.  Recently, Priceline’s Booking.com has agreed to display some of its properties on TripAdvisor’s Instant Booking platform. Priceline’s other websites like Rentalcars.com and Agoda.com are also fueling the company’s international growth. [1] [2]

However, despite the strong momentum in almost all its segments, the company has guided to a slower growth in Q3 2015, primarily because of the weak Euro exchange rate that is expected to dampen its performance in the European regions. The company’s guidance for Q3 2015 includes a 1% to 8% year-on-year increase in revenues and a 3% to 10% increase in gross profits (19% to 26% growth of gross profits on a constant currency basis). [1] [2]

We are in the process of updating our price estimate of $1,280 for Priceline’s stock.

Relevant Articles
  1. What’s Next For Copart Stock?
  2. Should You Pick Atkore Stock At $90?
  3. Tesla & Trump: Risks To Consider
  4. Can Streaming Gains Drive Disney Stock 2x?
  5. What’s Next For Gap Stock?
  6. What’s Driving Altria Stock Higher?

See Our Complete Analysis for Priceline Here

Priceline’s Alliance With HomeAway And Expedia’s Recent Acquisition Of HomeAway

Kayak, Priceline’s travel search engine, entered into an agreement in June where it will list HomeAway’s vacation rental properties on its website. [3] Globally, the largest vacation rental marketplace, HomeAway, lists over 1 million live listings in close to 200 countries. Though HomeAway is a rival of Priceline’s accommodation platform, Booking.com, however, Booking.com doesn’t list a huge number of vacation rentals and this partnership will allow Priceline to build a stronger presence in the vacation rental segment. Priceline currently lists B&Bs, tree houses, and even igloos on its Booking.com platform. Hence, from being the world’s largest online hotel supplier, Priceline aimed to move towards being the world’s largest accommodation provider with this agreement.

However, a couple of days back, Expedia– Priceline’s chief rival, and also HomeAway’s partner since 2013– has decided to acquire HomeAway for $3.9 billion. This alliance is expected to displace Booking.com as the largest accommodation seller in the world in terms of properties. The acquisition is expected to expand Expedia’s offerings to at least 1.3 million , as compared to Booking.com’s 821,400. [4]

What will be interesting is to note Priceline’s reaction to the current development. We expect Priceline’s management to give some explanation as to how the dynamics will work, now that HomeAway is about to be a part of Expedia.

 Priceline’s Presence On TripAdvisor’s Instant Booking Platform And Booking.com’s Future Growth Strategies

In October, Priceline entered into an agreement to display some of its accommodation properties on TripAdvisor‘s Instant Booking platform. Priceline’s other websites are also expected to participate on Instant Booking, in the future. (Read Press Release.) This was a big development for TripAdvisor, which for so long only displayed hotels on its platform. Though the platform included some of the leading global hotel brands, the presence of the world’s largest OTA would substantially increase TripAdvisor’s user appeal and its future potential for growth. Also, since almost 50% of TripAdvisor’s revenues come from Priceline and Expedia, hence including them on its platform might help TripAdvisor’s growth even further. In its recent earnings call, even Expedia’s management didn’t rule out the possibility for the company to display on Instant Booking in the future, subject to certain conditions.

Priceline’s Booking .com is aiming for 20% growth in bookings in Q3 2015. Booking.com is also eyeing China along with the U.S. for its expansion opportunities. According to Priceline’s CEO Darren Huston, the company has three facts boosting future growth: the rate of growth of travel is twice that of the rate of growth in GDP, the do-it-yourself travel is on the rise in comparison to packaged travel, and online travel is growing at a faster rate than offline travel. Booking.com had accounted for 85% of the company’s revenues in Q2 2015. [5]

Priceline’s Foray Into The Restaurant Reservation Segment

In September, Priceline acquired AS Digital–an Australian-based restaurant reservation website. AS digital will soon be integrated with Priceline’s North-America based restaurant booking website, OpenTable. OpenTable, which is the leader in the restaurant reservation segment in North America, will soon be expanding its presence in Australia, Japan, and across the Asia Pacific region with the aid of AS Digital. [6] OpenTable has lately been preparing for an international expansion and this acquisition will further help these plans.

With this acquisition, Priceline might be in a position to provide competition to TripAdvisor in the restaurant reservation segment outside North America. TripAdvisor has so far been holding the leading position in restaurant booking websites outside the U.S. with its multiple acquisitions over the last year. Currently, TripAdvisor’s rebranded restaurant platform, TheFork, spans across 12 countries and caters to reservations in over 28,000 restaurants. [7]

 

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

Notes:
  1. The Priceline Group Reports Financial Results for Second Quarter of 2015, Priceline Press Release, August 5, 2015 [↩] [↩]
  2. Priceline’s Q2 2015 Earnings Call Transcript, Seeking Alpha, August 5, 2015 [↩] [↩]
  3. Kayak Partners With Booking.com Competitor HomeAway on Vacation Rentals, Skift, June 1, 2015 [↩]
  4. Expedia Acquires HomeAway for $3.9 Billion, Skift, Nov 4, 2015 [↩]
  5. Booking.com targets China, U.S. growth: CEO, Reuters, October 9, 2015 [↩]
  6. The Priceline Group Announces the Acquisition of AS Digital, Priceline Press Release, September 3, 2015 [↩]
  7. TripAdvisor’s Q2 2015 earnings Call Transcript, Seeking Alpha, July 23, 2015 [↩]