What 3 Analysts Think Of Priceline Now

Shares of Priceline Group Inc PCLN were trading slightly lower Friday, continuing Thursday's decline after the company posted an upbeat first quarter results, but issued a weak second quarter outlook.

Here are what three of Wall Street's top analysts have to say.

RBC: Priceline Remains One Of The Best Growth Assets

Mark Mahaney commented in a note on Thursday that Priceline remains in investment mode given for its OpenTable and its SaaS booking suite. At the same time, the company continues to see online advertising pressures and expanding its offline ad campaigns.

The analyst noted that almost 90 percent of Priceline's Bookings are international, current foreign exchange conditions have created "an almost perfect storm" for the company. However, the company is likely to "weather" the storm.

"Even in the eye of the storm, Priceline is still generating 30 percent plus gross profit growth – best read on top-line growth," Mahaney wrote. "And we still see two very substantial new growth opportunities emerging – Vacation Rentals and China Outbound."

Mahaney also pointed out the "real negative" was the second quarter profit guidance and ongoing deleverage in the business model. Despite that, the company will "cycle through" some of its investments by the second half of 2015 and see a margin recovery along with accelerating earnings per share growth later this year.

Shares remain Outperform rated with an unchanged $1,400 price target.

Benchmark: Fundamental Business Remains Healthy

In a brief note on Friday, Daniel Kurnos commented that Priceline's results represented the "typical" upside surprise quarter with a weaker-than-expected guidance.

In the first quarter, foreign exchange headwinds increased to -17 percent impact on international gross bookings, driving a 3.5 percent outlook at the midpoint for both total gross bookings and revenue versus the consensus estimate of 8 percent. Furthermore, proforma EBITDA was guided down 9 percent year-over-year at the midpoint of $740 million versus the consensus estimate of $846, largely reflecting declining online advertising return on investment.

Nevertheless, Kurnos continues to believe Priceline's fundamental business remains healthy, as demonstrated by a strong room-night growth while an international expansion for OpenTable and a stabilization of spending in China adds further confidence in the long-term picture.

Shares remain Overweight rated with a price target lowered to $1,350 from a previous $1,400.
Deutsche Bank: Here Are The Negatives To Monitor

Ross Sandler commented in a note on Thursday that the Priceline story "remains simple" as shares are trading at a discount to the consumer internet sector at 18x 2016 EPS, above the mid-point of its historic range. In addition, management's "conservative" forward guidance creates an opportunity to add to positions, but investors should be mindful of several negative aspects to monitor.

Priceline's guidance is calling for an approximate 550 basis points of deleverage in non-GAAP operating margins to gross profits and 420 basis points in EBTIDA to gross profit margins. In addition, Priceline's room night growth fell short of Expedia Inc EXPE's reported 28 percent growth (ex-acquisitions). Finally, Priceline suggested it will "lean into" paid marketing channels, suggesting more aggressive bidding and lower return on investments.

Shares remain Buy rated with an unchanged $1,425 price target.