Priceline: Poised to Push Upward

NEW YORK ( TheStreet) -- Priceline.com ( PCLN) has been around since the days of the dot-com bubble. Now a leader in online travel, analysts believe there's plenty more upside from Priceline's current levels.

The company's stock has outperformed rivals such as Travelzoo ( TZOO), Expedia ( EXPE), and Orbitz ( OWW), as priceline continues to expand into its most important markets, Europe and the UK. Shares of priceline are up 58.5% year-to-date, while Travelzoo is off 14.3%, and Orbitz is down 18.35%. Expedia shares have gained 9.26% since the start of the year.

Not long after receiving a $1,000 price target from Piper Jaffray, analysts from Benchmark and Goldman Sachs have raised their price targets on priceline shares.

Benchmark analyst Daniel Kurnos believes the company's cash flows could rise substantially in the second part of 2012, as it increases its operating leverage in emerging markets and the hotel industry continues to show favorable trends. The analyst boosted his earnings per share estimate for 2012 to $32.31, up from $31.30. He also raised his price target from $692 to $840.

"We see trends in the hotel industry as predominantly favorable, despite ongoing macroeconomic headwinds," Kurnos wrote in his note. "Recent data from Pegasus Solutions showed that booking windows continue to lengthen for leisure and business travel, reaching pre-recession levels globally, supporting our thesis that travel demand should improve modestly in 2012 despite elevated oil prices." He rates priceline shares "buy."

Kurnos notes that Booking.com, priceline's booking agent, will continue to be a strong performer, "as we estimate Booking's market share may still only be in the mid-high single digit range, despite significantly outperforming peers in the region."

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

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.

Check out our new tech blog, Tech Trends. Follow TheStreet Tech on your wireless devices.

-- Written by Chris Ciaccia in New York

>To follow the writer on Twitter, go to http://twitter.com/commodity_bull.

>To submit a news tip, send an email to: tips@thestreet.com

More from Technology

Elon Musk's Latest Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Latest Twitter Tirade Is the Dumbest Thing on Wall Street

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Some Companies Are Already Feeling the Effect of GDPR

Some Companies Are Already Feeling the Effect of GDPR

Experts Break Down GDPR Risks for Investors

Experts Break Down GDPR Risks for Investors

Netflix Ready to Surpass Disney as America's Most Valuable Media Company

Netflix Ready to Surpass Disney as America's Most Valuable Media Company