How Priceline Can 'Negotiate' More Upside

NEW YORK ( TheStreet) --With Priceline.com ( PCLN) reporting mixed first-quarter results, analysts still believe there's plenty of room to "negotiate" a higher stock price, despite worries over Europe.

The Norwalk, Conn.-based company posted first-quarter non-GAAP earnings that beat Wall Street expectations, but was cautious on the second quarter, especially in Europe, where it generates the majority of its revenue.
William Shatner's "Negotiator" may have been killed off, but priceline's chances for higher share price are alive and well, analysts say.

Pricline, which competes with Expedia ( EXPE), Orbitz ( OWW), and Google ( GOOG), noted that Europe was soft (not something we didn't already know), but it has still been able to keep margins high as consumers maintain price sensitivity. EBITDA earnings before interest, taxes, depreciation, and amortization margins rose 250 basis points to 36.8% during the quarter.

Bank of American Merrill Lynch analyst Justin Post said the second-quarter guidance was very similar to the first-quarter guidance, and Priceline shares managed to rise 33% in the past three months. The stock was losing 4.5% to $686.78 in morning trades.

"Priceline built in bookings deceleration in remainder of 2Q into guidance and, if Europe holds up, we see potential for 50%+ ex-FX bookings growth in 2Q (modest deceleration vs 1Q) and bookings upside in 3Q (vs. our 37% ex-FX est.) on easier year-over-year comps," Post wrote in his research note. He ha a buy rating on the stock and raised his price target to $810 from $800.

The company may have been conservative with its second-quarter guidance, wrote Citigroup analyst Mark Mahaney in a research note, but Priceline has " r easonably sustainable competitive advantages in Europe," and " s ignificant Asia & Latin American growth drivers with Agoda & Booking.com."

Priceline expects second-quarter earnings of $7.30 per share, below the $7.37 per share analysts are forecasting. It also expects revenue rising between 18-23% year-over-year in the second quarter with total gross travel bookings increasing 26-31% from last year.

Morgan Stanley's Scott Devitt said the outlook for international bookings that Priceline gave for the second quarter should alleviate some of the worries about Europe.

"Despite elevated expectations, Priceline.com outperformed CQ1 consensus estimates. Headline CQ2 guidance appears weak; however, we think the guide on International ex-FX bookings growth of 41-46% Y/Y (the most important metric) should satisfy investors given a tough comp and European macro softness," Devitt wrote in a research note. He has an overweight rating on the stock with an $800 price target.

The stock has been an exceptional performer in 2012, rising more than 50%, and the sell side has only grown more bullish as the stock has gone up. Earlier this year, one analyst laid out the case for a Priceline shares reaching $1000, a scenario that requires the company to maintain its lead in the international market.

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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