Priceline: A Growth Powerhouse – Forecast Profits And/Or Cash Flow Not Prices!

In part 1 of this series found here, I elaborated on the importance of forecasting and suggested possible approaches that investors could implement.

FAST Graphs Fundamental Preview on Priceline: Forecasting Earnings And/Or Cash Flows

Since a picture’s worth 1,000 words, and a video worth much more, I offer the following FAST Graphs fundamental analysis on Priceline (PCLN) with a focus on forecasting. This is the second in a series of videos I plan to offer on high profile and popular stocks:

Source: F.A.S.T. Graphs Video

Summary and Conclusions

Priceline is a powerful growth stock that is likely to continue growing at high double-digit rates for the foreseeable future. Consequently, odds are if you hold the stock long enough, you’re likely to earn a long-term profit on your investment. Furthermore, Priceline is currently commanding a premium multiple of earnings and cash flows relative to its historical norm. On the other hand, it is not excessively valued relative to its above-average long-term growth potential. Nevertheless, I would like to see it a little cheaper before I personally became interested in investing.

Morningstar typically concludes their analyst reports with a short summary of pros and cons.  In my opinion, the pros on Priceline outweigh the cons as follows:

Bulls Say

Outsize online travel bookings growth witnessed the past few years in China and emerging markets will continue over the next 10 years, given low penetration levels and increased online usage, and Priceline is positioned well to benefit.

Mobile application usage is increasing rapidly, and Priceline has a dominant global position. Mobile has reached around 40% of total bookings.

Priceline is strengthening its network effect through both organic and inorganic initiatives and in fast-growing vertical markets like in-destination and vacation rentals

Bears Say

Competition from existing and new entrants could meaningfully affect Priceline’s growth outlook, although we do not view TripAdvisor’s Instant Booking initiative or Expedia’s recent acquisitions as a large threat to Priceline sustaining its network advantage.

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Disclosure: No position at the time of writing.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a ...

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