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Lone Pine Capital Boosts Its Stake in The Priceline Group

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Apr. 14 2015, Updated 12:06 p.m. ET

Lone Pine raises stake in Priceline

Lone Pine Capital upped its position in The Priceline Group (PCLN) in the fourth quarter of 2014. The position accounts for 6.68% of the fund’s total fourth quarter portfolio and is its third largest position. The fund owns 1,398,233 shares, up from 729,265 shares in the previous quarter.

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Overview of Priceline 

Priceline (PCLN) is a leading player in the online travel services industry, with five primary brands and several ancillary brands. Its primary brands are:

  • booking.com
  • priceline.com
  • agoda.com
  • KAYAK
  • rentalcars.com

Priceline offers accommodation reservations and also helps consumers make reservations for rental cars, airline tickets, vacation packages, and cruises. Consumers can easily compare information for airline tickets, hotel accommodations, and rental car reservations from hundreds of travel websites via KAYAK’s websites and mobile applications.

Priceline generates revenues through travel commissions, reservation booking fees, and online advertising. The company has a 0.54% exposure to the iShares Russell 1000 Growth ETF (IWF). The company also comprises 2.64% of the Consumer Discretionary Select Sector SPDR ETF (XLY). XLY also includes Priceline’s online travel company peers TripAdvisor (TRIP) and Expedia (EXPE), with 0.41% and 0.40% exposures, respectively.

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Priceline’s growth trends

Priceline noted in its quarterly filing that the company has benefited from the consumer shift to online channels, especially the growing adoption of mobile platforms. Moreover, emerging markets such as Asia-Pacific and South America have seen increased growth in travel-creating opportunities for online travel companies such as Priceline.

For 2014, Priceline’s international business—most of which is generated by Booking.com—represented approximately 87% of total gross bookings.

With the 2014 acquisition of OpenTable, Priceline faces competition from other restaurant reservation providers such as LaFourchette, a European restaurant reservation business owned by TripAdvisor, and Yelp’s SeatMe service.

Priceline to buy Rocketmiles

Priceline plans to acquire travel start-up Rocketmiles for $20 million. After the acquisition, Priceline’s customers will be able to book lodging directly through its own network.

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Priceline shares jump 8.5% on strong 4Q14 results

For the fourth quarter of 2014, The Priceline Group recorded bookings of $10.7 billion, up 17% year-over-year (or YoY). Room nights booked also grew by 24%, and rental car days grew by 16%.

Priceline’s revenue was up 19% YoY to $1.8 billion. Generally accepted accounting principles (or GAAP) net income was $452 million, or $8.56 per diluted share, compared with $378 million, or $7.14 per diluted share, in 4Q13.

2014 results

For 2014, Priceline’s gross bookings grew 28% to $50.3 billion, primarily driven by growth in the hotel inventory of booking.com. Its revenues grew 24% to $8.4 billion. GAAP net income for the full year was $2.4 billion, or $45.67 per diluted share, compared with $1.9 billion, or $36.11 per diluted share, in 2013.

Outlook for 1Q15

For 1Q15, Priceline expects its gross bookings to increase by 2% to 9%. In addition, the company expects its revenues to increase by 4% to 11% and that GAAP earnings per share will be between $5.25–$5.80. The Priceline Group’s board of directors authorized a $3 billion share buyback program.

The next part of this series will discuss the fund’s position increase in Autodesk.

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