January 4, 2011

Priceline (PCLN)

Priceline looks promising:
  • Another high earnings grower like OPEN and NFLX - as expected, growth is declining. It's just tough to maintain such a high flying-growth rate - 55% for year-end Dec 2010 vs 33.6% for year-end Dec 2011.
  • This is just plain cheap on earnings (using yesterday's close of $415.99) - trading at 31.5 times the 2010 EPS estimate which is a dirt cheap 0.57 times 2010 growth
  • To give only a 10% upside from these levels, Priceline only needs to trade at 0.63 times the 2010 growth rate.
The 2010 earnings report is not far off, 2/4/11, so we should also take a closer look at how this stacks up against the 2011 estimates.
  • PCLN is currently trading at 23.6 times 2011 estimates, which is still much less than 2011 growth, only 0.7 times the 33.6% rate.
  • Looking at a 10% upside, Priceline only needs to trade up to 0.77 times the 2011 growth rate.
Of the 3 high growers, PCLN looks much cheaper than either OPEN or NFLX. I'm likely to go long on this one and will let you know when it happens.

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