Strong cash flows for 2015
For fiscal 2015, Priceline generated operating cash flow of $3.1 billion or about 34% of its gross profit. At the end of the year, the total cash and investments stood at ~$10.6 billion, about 16% of its current market cap.
The company said it invested $3 billion in marketing during 2015 in order to build a stronger brand image for its brands around the world. It also aimed to bring new customers to its website. As Priceline continues to grow in this extremely competitive market, this investment can continue to form a significant part of its expenditures.
Acquisitions and investment
The online travel industry has been buzzing as its key players aggressively acquiring smaller competitors, resulting in a consolidation. The Priceline Group also made some key acquisitions in the years such as Agoda.com, Kayak, Rentalcars.com, and OpenTable. The company also reinvested in Ctrip with a fresh investment of $500 million in December, taking its total investment in the company to around $2 billion.
For the upcoming year, Priceline said it would spend its cash on exciting new opportunities such as OpenTable’s international expansion or BookingSuite cloud software offers or Booking.com for Business. This essentially means that PCLN continues its strong focus on growth, which is good news for investors.
Companies focused on growth usually do not pay out dividends, which has been the case with PCLN. We believe this could continue in 2016 as PCLN continues to reinvest heavily in its business.