Priceline Group Inc (NASDAQ: PCLN ) is up 1.3% after having its rating reiterated at Cantor Fitzgerald.
Cantor is now calling for PCLN stock to hit $1,560 in the next year, up from its previous price target of $1,453.49. Sure enough, PCLN stock is trading hands for $1,478 today.
Shares of Priceline have run 23% over the past year, which beats the 15% gain put up by the S&P 500 Index . Heck, not even the once-beloved Apple Inc. (NASDAQ: AAPL ) could pass muster in the past 12 months.
So the question a lot of investors surely ask when they approach a stock going up pretty much unimpeded is: how long is this sustainable?
PCLN Is No Dog
The numbers don't lie: Priceline stock has beaten earnings for as far back as the first quarter of 2013. Those earnings beats weren't squeakers either. In the past four quarters, PCLN beat the Street's projections by 4.6%, 7%, 9.1% and 9.8%, respectively. And PCLN is slated to grow earnings about 18% for both this quarter and the full year.
And Priceline's earnings are outpacing growth in PCLN stock, leaving its shares without any froth in an overvalued market. The broader market is trading hands at an average of 25 times earnings . PCLN? It's trading for 18.5 times future earnings, with long-term earnings growth of 16% and revenue growth of 15% for the next two years.
Not too shabby.
There are some concerns, however. Airbnb , which could soon go public , is a legitimate threat to Priceline's business over the long term. In particular, Priceline's image doesn't resonate with the younger crowd the way Airbnb does. And Airbnb is growing like clockwork. Its latest funding round values the company at some $30 billion . Priceline is twice as big, but it has been around for much longer.
Yet, if Airbnb is a threat to the traditional hotel industry, and therefore traditional hotel booking sites, then that threat has yet to materialize. A report from earlier in the year shows that, in a survey of 1,400 travelers, 99% continued to use hotels and 72% said they would use an Airbnb competitor.
The biggest threat, however, comes from the industry itself. As Priceline founder, Jay Walker, recently stated, the booking industry is a dinosaur :
"This is really the end of the age of automation; [online travel booking sites are] a Model T Ford with a Ferrari engine. There's no question that the phone and mobile changes everything, then you add augmented reality , artificial intelligence, and big data … this version of online travel is going to seem like a dial phone. What's different now is that the compounding growth rate has caught up."
Priceline will need to innovate if it hopes to continue leading the booking industry and live up to its long-term growth rates. And it knows that . But if it can effectively do so - and before other competitors can - those already impressive growth rates could actually be on the conservative side.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
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