Shares of online travel company The Priceline Group (PCLN, 1,240.12) are up $129.44 or 11.65% as of midday today after reporting stronger-than-expected full-year 2015 results. The stock has risen 17.2% so far this week.
As you recall, travel business was interrupted during the fourth quarter due to the Paris terrorist tragedy. In a worry-laden investment environment, Priceline-focused worries were that a potential economic recession, compounded by terrorist episodes, would keep consumers from travelling.
As it turned out, that was not the case. Priceline’s travel bookings rose 24% year-over-year in the fourth quarter. The consensus EPS estimate for the fourth quarter was $11.81, while the company actually earned $12.63 per share. You can read the full financial report on the Priceline website.
In addition, the company guided Wall Street a little higher on their first quarter 2016 earnings estimates.
After completing a $3 billion share repurchase that was initiated last February, Priceline authorized a new $3 billion share repurchase program today, so expect analysts to increase their earnings per share (EPS) estimates in the coming weeks. The previous expectation for 2016 EPS was a growth rate of 17.3%.
PCLN reached new all-time highs in November 2015, then traded down to support levels established in January/February 2015.
Yesterday, I told investors, “a fourth-quarter earnings beat, combined with positive stock market momentum, could push the stock price to 1,150.” Well, I apparently underestimated that bullish scenario!
I’ll need to see the new consensus 2016 earnings estimates to get a handle on whether the stock is still undervalued or fairly valued. (But it’s certainly not overvalued, based on the recent price/earnings ratio.)
Stocks tend to repeat previous trading patterns. There’s some upside price resistance at 1,250, and again at 1,330. Therefore, traders should take the money and run, because the stock already reached all reasonable expectations of short-term upside. If the stock subsequently pulls back to 1,150, it’s a buy!
Buy-and-hold investors still own a great stock. Hold your shares. Consider buying more shares on any pullback to 1,150.
It’s normal for a stock to trade sideways for a while after a big run-up like PCLN had today. Unless you’re a very short-term trader, I see no need for anybody to Sell.
My official rating remains: Hold.