by Serge Berger | November 11, 2013 8:04 am
Online travel service provider Priceline.com (PCLN) reported third-quarter earnings last Thursday and delivered a pair of handy beats. Priceline earnings for Q3 came in at $17.33, 40% higher year-over-year and topping estimates of $16.21. The top line for PCLN was almost $2.27 billion, up 33% over the year-ago period and handily beating the Street consensus for $2.22 billion.
In terms of forward guidance, PCLN said that profit, excluding some items, will be in the range of $7.80 to $8.30 a share in the fourth quarter, which is slightly below analyst estimates.
One of the major causes for the increase in revenue came from Priceline’s significant increase in gross bookings, i.e. the total value of the company’s travel sales. As a result of the positive earnings report, analysts revised their forward expectations for Priceline stock to the upside. For example, Monness Crespi Hardt upgraded PCLN from “neutral” to “buy” and slapped a $1,250 price target on it.
Investors reacted cheerfully Friday on the back of the earnings report, bidding Priceline stock higher nearly 5% and putting PLN back into a bullish position after the one-day freak-out the day prior.
From a longer-term perspective, as I discussed on Sept. 19, PCLN remains trading in a constructive pattern after staging a major breakout in May of this year. While the steepness of the slope since the May breakout, as well as its duration is flashing some worrying signs, still favors the bulls — at least for the time being, and until the trend breaks. A recent consolidation pattern has allowed the momentum oscillators to reset, i.e. consolidate, thus allowing for further upside in the near-term.
The daily chart of Priceline stock shows that despite last Thursday’s one-day selloff, PCLN held its 2013 uptrend, which continues to be reinforced by its 50-day simple moving average. Ever since the chart breakout in May, PCLN has pushed higher with a series of consolidation patterns — mostly bull flag patterns — that led to breakouts to higher highs.
With last Friday’s bullish reversal, where PCLN gapped up at the open and never looked back, it has once again reached the upper end of such a bull flag pattern and looks poised to rally higher.
A break above $1,085 would qualify as a bullish breakout, while a break below PCLN’s 50-day moving average (yellow) would be bearish and qualify as break of a major trendline.
Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the “Essence of Swing Trading” eBook by clicking here. At the time of publication, Berger had no positions in the securities mentioned.
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