Priceline Group Is a Generational Stock
Generational stocks are scarce—as the name implies—but, for those lucky enough to get in on the early stages, the rewards are usually enormous. One of these so-called generational stocks is online travel site company Priceline Group Inc (NASDAQ:PCLN), which I covered in its early days in early 2000.
When I first came upon PCLN stock, my bullish thesis was that the fledgling online travel site could really benefit as the Internet picked up steam and consumers shifted to the web to book their travel instead of needing to visit or call a travel agent.
The shift to online shopping did materialize, and it helped propel Priceline Group Inc into the stock market stratosphere.
According to Statista, the global online travel market could jump to $762.0 billion by 2019. And, given that global retail travel sales are estimated at $22.05 trillion in 2016, the size of the potential online travel market is immense, as more consumers shift to the Web. (Source: “Statistics and facts on the online travel market,” Statista, last accessed January 6, 2017.)
The Priceline stock chart is beautiful, as the stock has steadily elevated over time from below $10.00, when I first noticed the company, to the current $1,500.00 level.
Chart courtesy of StockCharts.com
PCLN has never initiated a stock split despite its meteoric rise. The irony is that Priceline Group Inc did undertake a stock consolidation or reverse stock split on June 16, 2003, when the company issued one new share of PCLN stock for every six old shares of Priceline stock.
For those hoping for a Priceline stock split, this has been a desire for years, but so far it hasn’t happened, despite pressure from Wall Street. Of course, traders want to see splits from top companies like Priceline Group Inc, since such a move generally results in the share price rising higher.
PCLN stock is up 27% over the past year, and has nearly doubled its move in the S&P 500. The stock is off of its record $1,600.93 on November 10, 2016 and, even at the current price, it is still is not outrageously priced, trading at 19.8 times its 2017 earnings per share (EPS) and a price/earnings to growth (PEG) ratio of a mere 1.36.
My Bullish Thesis for Priceline Stock
The underlying fundamentals of Priceline stock support a bullish thesis.
Revenues have steadily ramped up higher in each of the last few years, up 72% to $9.22 billion in 2015, compared to $5.26 billion in 2012. The growth is estimated to continue at 16.20% and 16.0% in 2016 and 2017, respectively, which is good, given the size of the company. (Source: “The Priceline Group Inc. (PCLN),” Yahoo! Finance, last accessed January 6, 2017.)
What has been really impressive has been Priceline Group Inc’s ability to expand its gross margin in the last few years, as shown below. To say that the margin expansion is impressive would an understatement.
PCLN Gross Margin
- 2012 77.62%
- 2013 84.13%
- 2014 89.85%
- 2015 93.15%
So, while the market will continue to hope for PCLN stock to split, Priceline Group Inc will continue to grab market share and protect its top spot amongst travel stocks.