3 Reasons Why You Should Buy Priceline Stock
Online travel stock Priceline Group (PCLN) , which operates brands like Booking.com, Agoda.com, and OpenTable, is a roaring investment opportunity that could make you tons of money.
The prospect of improved profits from cheaper ads, a recent 10% stock correction and strong fundamentals thanks to the tourism business have created a solid investment opportunity. The company should weather the Brexit shock capably. It is poised to deliver 15% gains within 12 months.
Here's a breakdown of the factors working in favor of Priceline.
Lower Costs
In the online battle with Expedia to garner tourists' dollars, Priceline spent on online ads. This led to rising costs.
But now Morgan Stanley has concluded that the online ad spending battle is over. This means that Priceline will lower costs to the potential benefit of its margins, and for investors.
Priceline's adjusted EBITDA margins should rise for the first time in five years. The company is expected to deliver 15-17% earnings per share (EPS) growth in both 2016 and 2017, in line with the nearly 15% analysts forecast for the next five years (faster than TripAdvisor's estimated 9.56% growth).
The Benefit of a Brexit
Over the last few sessions, Priceline has seen a 10% stock price drop, but as is the case for other companies, that stems largely from Brexit-related gloom.
But the fears that travel will slow due to new restrictions between the U.K. and EU, and of a U.K. and European economic meltdown, are premature. There is no imminent spike in unemployment or a financial collapse threatening to arrest consumer spending. The lengthy nature of the EU withdrawal process will discount any immediate drop in online tourism spending.
A substantial portion of European travel consists of consumers moving within their countries. According to Piper Jaffray, close to 50% of Priceline's bookings are by Europeans.
Moreover, there's no solid evidence that travel in the long run will diminish significantly.
Priceline is not destined for any negative surprise. Serious investors should tank up on the stock, currently trading at a forward price-to-earnings (P/E) ratio of less than 16 times.
The 25 analysts offering 12-month price forecasts for Priceline have a median target of $1,440 per share. That translates to 15.3% upside potential.
Core Strength
Priceline's succeeded globally by building a simple business model that was scalable. They've taken the time to understand their market better than most competitors. The company has grown sales by more than eightfold and boosted profits 24 fold in the last 10 years.
The company's annual free cash flow is nearly $3 billion. It's on solid footing with good financial ratios. The stock is poised for a strong rebound. Grab this opportunity immediately.
85% Accurate Trader gives his Personal Guarantee: "Give Me 9 Minutes a Week and I Guarantee You $67,548 a Year." Priceline provides discounts to travelers, and it's stock is priced at a discount today. This is a perfect opportunity to jump in. But what if I told you there is a way to make $67,548 per year - or more - without stocks, just by following this simple step-by-step process? The trader who is sharing this secret has been right more than 8 out of 10 times, turning $5,000 into more than $5 million for himself. Click here to see how easy it is to follow his lead and collect thousands of dollars in "Free Money" every month.
See full Brexit coverage here.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.