Priceline's 4Q15 Earnings: Can It Reach New Heights in 2016?
Room nights grew
During 4Q15, Priceline’s global accommodation business booked 99 million room nights, an increase of 27% year-over-year (or YoY) from 4Q14 despite facing significant headwinds from foreign currency fluctuations.
This boost was driven by a 29% YoY growth in international bookings, as well as the ever-growing accommodation availability on Booking.com. Booking.com’s accommodations grew by 34% YoY, or over 200,000 properties, taking the total to 850,000 accommodations.
Car rentals and advertising grow too
Priceline’s rental car days also grew by 11% YoY in 4Q15 compared to a 13% YoY growth in 3Q15. As can be seen from the chart above, growth in rental car days booked have been decelerating since 2013.
Media and advertising revenues also grew by 18% from $1.3 billion to $1.53 billion during 4Q15.
Air tickets declined
Sales of online airline tickets continued the declining trend, falling by 3% to 1.7 million. However, this should not have an impact on Priceline’s business, as airline tickets sales comprise just 1% of PCLN’s total bookings.
Outlook
Lower crude prices have led to cheaper airline tickets. Global airfares fell by about 15% over the last several months, boosting overall travel bookings growth. Combined with the increasing discretionary spending and shift of travel booking from offline to online, this bodes very well for OTA players like Priceline, Expedia (EXPE), Ctrip.com (CTRP), and TripAdvisor (TRIP). Priceline comprises ~5.22% of the DWA Consumer Cyclicals Momentum ETF (PEZ).
However, concerns from external factors such as natural disasters or terror attacks could continue to impact PCLN’s bookings. For example, its global room night growth rate slipped by ~10% following the Paris terrorist attacks in November 2015, although it recovered in December. The extent of the impact depends on the magnitude of such factors.
Priceline (PCLN) expects hotel accommodations to continue to drive its growth, driven by the factors discussed above. However, the growth rate could decelerate going forward. For 1Q16, Priceline expects its room nights booked to grow by about 20%–27% year-over-year. The growth rate is expected to decelerate through the rest of the year.
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