Priceline (PCLN) Stock Chart Indicates Potential 20% Upside

With Priceline (PCLN), try going long on a dip closer to $1,400.
By Bruce Kamich ,

NEW YORK (TheStreet) -- Lots of top patterns appeared on stocks this year, but not on Priceline Group (PCLN) .

PCLN did have a $200 pullback this August when the overall market slipped, see chart above, but declines of $100, $200 or more are not that unusual for this four-digit stock. The rally in PCLN has been so powerful that hundred-dollar declines hardly impact the slope of the 50-day simple moving average. The On-Balance-Volume (OBV) has been improving the past two months and the Moving Average Convergence Divergence (MACD) oscillator is rising in positive territory.

To capture the huge rally PCLN has had since late 2008, we needed to use a log scale on this chart, above. Notice how well the 40-week moving average has tracked the rally and the smooth, steady trend in the OBV line on this timeframe.

In the Point and Figure chart, above, we can see the breakout over $1,400. Point and Figure charts only look at price reversals while ignoring time and volume. Sideways price movement translates into price targets when prices make a breakout. The most recent breakout on PCLN gives and estimated price target of $1679. Because of the big dollar swings in the price of PCLN we would suggest trying to go long on a dip closer to $1,400.

TheStreet Ratings team rates PRICELINE GROUP INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

We rate PRICELINE GROUP INC (PCLN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth significantly trails the industry average of 45.5%. Since the same quarter one year prior, revenues slightly increased by 7.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.63, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, PCLN has a quick ratio of 2.11, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Internet & Catalog Retail industry and the overall market, PRICELINE GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for PRICELINE GROUP INC is currently very high, coming in at 91.78%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.67% significantly outperformed against the industry average.
  • Compared to its closing price of one year ago, PCLN's share price has jumped by 33.53%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, PCLN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • You can view the full analysis from the report here: PCLN

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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