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Priceline is Positioned to Grow Further

August 19, 2014 | About:

Priceline Group Inc. (NASDAQ:PCLN) is an online travel company that offers its customers hotel room reservations at over 295,000 hotels worldwide through the Booking.com, priceline.com and Agoda brands. In the United States, the company also offers its customers reservations for car rentals, airline tickets, vacation packages, destination services and cruises through the priceline.com brand. It offers car rental reservations worldwide through rentalcars.com. The Priceline Group provides online travel services in over 200 countries and territories in Europe, North America, South America, the Asia-Pacific region, the Middle East and Africa.

Tourism is a trillion-dollar industry, and Priceline.com Incorporated rules this space. Priceline's stock had a stunning performance over the last five years. It has been very successful in capturing the huge business opportunities presented by e-commerce in the last decade.

Performance analysis

Priceline confirmed yet another great quarter. Second-quarter gross travel bookings for PCLN was $13.5 billion, an increase of 34% over a year ago. Gross profit for the second quarter was $1.9 billion, a 36% increase from the prior year. International operations contributed gross profit in the second quarter of $1.65 billion, a 38% increase over a year ago. The Group had GAAP net income applicable to common shareholders for the second quarter of $576 million, or $10.89 per diluted share, which compares to $437 million or $8.39 per diluted share, in the same period a year ago. Adjusted EBITDA for the second quarter 2014 was $809 million, an increase of 30% over a year ago.

“The Priceline Group achieved strong results for the second quarter as the summer travel season got off to a solid start for our brands,” said Darren Huston, president and CEO of the Priceline Group.

“We believe the Group delivered market-leading growth from both a top line and profitability perspective. Globally our accommodation business booked 90 million room nights, up 29% over the same period last year.”

Looking forward, Huston said, “The business is performing well and we will continue to build our franchise by investing in customer experience, content expansion and market penetration. We believe that our recently-announced expanded partnership with China’s Ctrip (NASDAQ:CTRP) will complement these efforts."

"We are also pleased to welcome OpenTable to the Group and are excited by the opportunity to deliver exceptional online booking experiences for our customers and partners – including hotels, rental cars, airlines and now restaurants worldwide.”

For the last seven years the company has been increasing its revenue at a steady pace of approximately 20% a year.

Acquisition of open table

Priceline announced a $2.6 billion cash deal acquiring Open Table. According to Huston, "Open Table is a great match for The Priceline Group. They provide us with a natural extension into restaurant marketing services and a wonderful and highly valued booking experience for our global customers. We look forward to helping the Open Table team accelerate their global expansion, increase the value offered to their restaurant partners and enhance the end-to-end experience for our collective customers across desktop and mobile devices."

OpenTable covers a network of more than 31,500 restaurants, and the company makes more than 15 million reservations per month. Profit margins are under pressure as the company is actively investing for growth, but OpenTable is generating impressive sales growth.

Final thoughts

The company continues consolidating its leadership position in the online travel industry. The way things are going for the company, investors have solid reasons to expect sustained growth from Priceline. Financial discipline is an important strength that has helped Priceline thrive. The company is a proactive genius that knows how to surprise and delight customers with its offerings. Priceline has ruthlessly pursued every growth opportunity to stay ahead of its competitors.

With a market cap of about $61 billion and a penetration of over 200 countries, Priceline Group is the world’s most valued travel company. I am quite bullish about this company and believe that it is going to create greater shareholder returns.

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