Will Market Share Gains Continue to Drive PCLN’s Revenue Growth?

For 4Q16, analysts expect Priceline’s (PCLN) revenue to rise 16.2%, less than the 18.9% growth the company saw in 3Q16.

Ally Schmidt - Author

Feb. 22 2017, Updated 5:35 p.m. ET

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Analysts’ estimates

For 4Q16, analysts expect Priceline’s (PCLN) revenue to rise 16.2%, less than the 18.9% growth the company saw in 3Q16. This result would mean a total revenue rise of 16.2% for the company in 2016, higher than that it saw in 2015.

Priceline’s revenue growth is expected to slow to 15.5% in 2017 and 14.7% in 2018.

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Travel growth to provide impetus

The growth in travel is here to stay. As income levels improve and people seek to get out of their comfort zones and have new experiences, more and more people are expected to travel. The world’s growing middle-class population is a testimony to this.

Increased online booking

According to Priceline’s most recent presentation, in 2015, its online room bookings grossed $228 billion. This level was just 35% of its total hotel bookings of $648 billion, meaning that there’s still a huge market for OTAs (online travel agency) to capture.

Going forward, more and more people are expected to book online. The growth in online booking has averaged 3% in each of the last four years. With the growth of the Internet and more people being able to afford traveling, there’s tremendous potential in the online travel industry.

Emerging markets are key

As discussed, international markets will pose major growth opportunities for Priceline. Emerging markets such as China, India, and Brazil are expected to be key growth markets. For example, China’s online travel market grew 50% in 2015, and it’s expected to continue its double-digit growth, reaching $75 billion in 2017.

Investors can gain exposure to Priceline by investing in the PowerShares DWA Consumer Cyclicals Momentum ETF (PEZ), which invests 6.1% of its holdings in Priceline. PEZ has no holdings in Expedia (EXPE), TripAdvisor (TRIP), or Ctrip (CTRP).


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