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Priceline Stock: Next Stop, $1,700?

By Rick Munarriz – Oct 20, 2016 at 3:06AM

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Susquehanna initiates coverage of the popular online travel portal with a bullish rating and ambitious price target.

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There's a new bull singing the praises of  Priceline Group (BKNG 1.63%). Susquehanna analyst Shyam Patil initiated coverage of the leading online travel portal with a bullish positive rating and a $1,700 price target. He sees Priceline gaining market share when it comes to both traditional hotels as well as the growing popularity niche of private accommodations.

There's long-term upside to Priceline, according to Patil, as it continues to gain share in the travel market across all of its online properties. Patil's price goal translates into 16% of upside from here, and he's not alone. Jefferies analyst Brian Fitzgerald also slapped a price target of $1,700 on Priceline stock in early August after posting blowout quarterly results, replacing his earlier price goal of $1,660. 

Patil and Fitzgerald aren't alone in feeling upbeat about Priceline. Two months ago, it was Evercore ISI analysts upgrading the stock, boosting their price target on the stock from $1,350 to $1,650. Evercore ISI joins Patil in pointing to Priceline gaining share in this market, a tantalizing bullish thesis given the dot-com darling's scalable model.

Getting ready to take off

There were reasons to worry about Priceline following the Brexit vote earlier this year, especially since its subsidiary is a juggernaut in Europe. However, most of the initial fears have proven unfounded, and Priceline continues to grow faster than the travel market in general.

Gross travel bookings soared 19% -- up 21% on a constant currency basis -- to $17.9 billion in Priceline's latest quarter quarter. Adjusted earnings didn't grow at the same pace, but buying back $2.5 billion worth of its stock over the past year helped deliver double-digit percentage growth on a per-share basis. 

A big test awaits on Nov. 7, when Priceline will discuss its results for the third quarter. This is always Priceline's strongest quarter given the popularity of summer travel with consumers. Priceline's guidance suggests the growth in gross travel bookings to decelerate slightly, down to a 14% to 19% year-over-year clip. The midpoint of its adjusted earnings is $29.05 a share, up 15% since the prior year's peak third quarter.

Priceline has historically been conservative with its guidance, leading analysts to perpetually park themselves just above the the midpoint of the online travel star's forecast. Reality has been even better. Priceline's actual results have beaten Wall Street's profit targets every quarter over the past year. Doing so again next month could do the trick, pushing the stock up to the $1,700 goal shared by at least two Wall Street analysts. The stock already broke through $1,500 earlier this month, hitting a new all-time high in the process. The path to new highs is clear, and now it's up to Priceline to make sure that it's cleared for takeoff.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Priceline Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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