Priceline group logo with key brands. Source: Priceline Group.
What: Shares of The Priceline Group Inc. (BKNG -0.45%) rose 17.6% during the month of October, according to S&P Capital I.Q. data.
So what: The online travel provider enjoyed several boosts to its stock price during the month. Analysts at investment firms Cantor Fitzgerald and Oppenheimer & Co. issued positive comments on Priceline during the first half of October. In addition, despite an initially muted response mid-month to the news that Priceline will join TripAdvisor's (TRIP -0.83%) "Instant Booking" platform, investors warmed to the proposition as the weeks wore on. While the deal is a monetary boon for TripAdvisor, it also holds tangible, if less direct benefits, for Priceline, such as greater visibility for the Booking.com brand, the first Priceline property which will appear on the service.
The "PCLN" ticker received further support during the second half of the month when Amazon.com announced that it was jettisoning its competing "Destinations" travel service. While this service never gained much market traction or name recognition, Amazon is such a formidable competitor in any market it enters, that Priceline investors were nonetheless relieved to hear that the project had been killed.
Finally, buying interest again gelled at the very end of October, in anticipation of the company's November 9th third quarter 2015 earnings report. These varied factors propelling Priceline stock resulted in a lovely upward trajectory, with very little resistance to speak of:
Now what: November has brought some resistance to the narrative in the chart above, as roughly half of Priceline's October run-up has been erased so far this month following the Q3 2015 earnings release. While the company reported gross travel bookings growth of 7%, a healthy revenue increase of 9.4%, and diluted earnings per share of $23.41 (besting prior year EPS by nearly 17%), Priceline stock sold off nearly 10% on the first trading day after the earnings were filed.
As often happens, investors didn't take issue with the company's reported quarter, rather, they focused on wrinkles contained in Priceline's forward guidance. Specifically, Priceline warned that the strong U.S. dollar would hamper fourth quarter results, and would continue to pressure results in 2016.
Management cited its current forecasts for the Euro and British pound, two significant currencies in Priceline's global book of business. The company sees 13% and 4% weaker average exchange rates for the Euro and pound respectively, against the greenback in the fourth quarter. Clearly, management wants to prepare investors for top and bottom line currency impacts next year.
Despite management's protestations, investors shouldn't read too much into the post earnings sell-off. Company executives haven't introduced any material change to the business or its prospects. It's quite likely that some investors used the 4th quarter outlook as an opportunity to take profits. Priceline's stock has returned handsomely to shareholders this year -- even after the decline month-to-date, shares are still up an impressive 17%.
