What’s Driving the PCLN Stock Boom?
Priceline Group Inc (NASDAQ:PCLN) stock soared in after-market trading after beating analysts’ profit estimates, despite also writing down the value of its “OpenTable” restaurant-booking service by $941.0 million.
The write-down represents more than a third of the $2.6 billion that Priceline paid to acquire OpenTable in 2014. Still, with the strong Q3 showing, the powerhouse stock was able to surge on Monday. However, the write-down cut into third-quarter net income, which fell about 57% to $506.0 million ($10.13 per share), from $1.20 billion ($23.41 per share) a year earlier. (Source: “Priceline Takes $941 Million Charge; Earnings Beat Estimates,” Bloomberg, November 7, 2016.)
PCLN stock also reported a 19% jump in quarterly revenue, driven by higher hotel bookings. Compared to estimates of $3.62 billion, revenue rose to $3.69 billion from $3.10 billion.
Third-quarter earnings were $31.18 a share, topping the average analyst estimate of $29.86, the company said in a statement. Gross travel bookings, the total amount of money spent by customers on Priceline’s websites, increased 25% to $18.5 billion. (Source: “Priceline revenue jumps 19 percent as hotel bookings rise,” Reuters, November 7, 2016.)
Investors were impressed by the announcement. Shares of PCLN stock soared 5.3% in after-hours trading on Monday.
Acquisitions like OpenTable and “Kayak.com” have have helped Priceline become the world’s largest online travel company by market value. OpenTable was Priceline’s largest acquisition and helped diversify Priceline’s traditional focus on flight, hotel, and car rental booking.
In an interview with Bloomberg, interim CEO Jeffery Boyd said that OpenTable represents only around two percent of the company’s total revenue.
“We put a long-term financial model together at the time of the acquisition that called for very rapid expansion of the international business and other growth initiatives and a fairly quick return of the revenue associated with those investments,” Boyd said. “The move that we’re announcing today is just a recognition that the best way to go about it is in a more measured pace.”