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Priceline: Poised to Push Upward

Priceline recently strengthened its balance sheet, issuing a $875 million convertible bond offering to help fund a buyback of stock, and add cash.

Google's (GOOG) expansion into the online travel space with its launch of Hotel Finder, higher oil prices and general weakness in the European economy are all factors that could affect priceline's core business. Priceline, however, has shown that competition is not a major concern, reporting exceptionally strong fourth-quarter results. Goldman Sachs analyst Heath Terry raised his priceline estimates because none of the above concerns have come to fruition yet. Terry rates priceline shares "buy."

Terry noted that priceline continues to gain market share. "We continue to believe Priceline's superior growth and strategic position, particularly in the European hotel market (over 80% of priceline's CSOI Consolidated Segment Operating Income is from International, the majority of which is Europe hotels) but increasingly in emerging markets like Asia and Latin America, warrant a more significant premium to the group," he wrote.

Terry raised his 2012 revenue and earnings estimates from $5.8 billion and $31.81 earnings per share, to $6.0 billion and $32.02 billion. Analysts polled by Thomson Reuters expect $5.55 billion in revenue and $31.19 per share in earnings. He raised his price target to $875 from $700.

Despite the Air Transport Association (IATA) recently downgrading its outlook for the industry, due primarily to higher oil prices, Terry noted that both passenger load factors and aircraft utilization are at or above pre-recession levels, which could lead the IATA to revise its forecast higher.

Shares of priceline are up 1% to $748.69 in Wednesday trading.

Interested in more on Priceline? See TheStreet Ratings' report card for this stock.

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-- Written by Chris Ciaccia in New York

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