Priceline – Cheap At Over $1,000 A Share

Priceline – Ready to Rebound

Can a very high-priced share still be a bargain?

Online travel agency Priceline (PCLN) has been as reliable a grower as almost any stock out there. The firm’s balance sheet is solid. The stock registers in the top 1% of the 1700 companies Value Line's main research universe, in terms of long-term appreciation.

Priceline's blend of outstanding fundamentals plus a high beta allow for good entry and exit points for those wanting to play with these shares.

Priceline is a pure play on the overall worlwide increases in travel via direct, customer-initiated (internet) bookings. Their 10-year numbers reflect the very favorable trends.

Somewhat surprisingly, when considering all-time record results, PCLN had drifted down from a 2014 peak of $1,379 to under $1,000. The Jan. 16, 2015, low also established a new 52-week nadir, at $990.61.

It is easy to get a bit foggy when dealing with absolute share prices this high. Refocus on valuation by looking at Priceline’s historical P/Es at key ‘best buying opportunities".

Friday’s new low put PCLN at its best (lowest) valuation since 2010, just before a less than one-year, 224% run higher. The late 2011 sell-off preceded a quick rebound from $402 to $775. The 2012 pullback to $554 turned out to be a base for the run to almost $1,400.

The two periods when PCLN paused each came from somewhat overvalued territory, at about 25x and 26x what were then current year EPS.

Priceline’s present-day multiple is just 16.5x expected 2015 EPS of $61.05. It was greater than 17x at each of the two most recent previous launching points.

PCLN’s very steady, post-recession average valuation, has run 20.7x. A return to that level would support a 12-month goal price of $1,264.

Continue reading at GuruFocus.

Disclosure: Short 1 PCLN Jan. 2017, $1,000 ...

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Joe Economy 5 years ago Member's comment

The stock was downgraded twice in the past 2 months; on Dec 2nd by FBR Capital, and on Jan 8th by Stifel. Tread carefully, its a long way down....