PCLN: A Pair of Bullish Trades for Priceline Stock Ahead of Earnings

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Online travel firm Priceline Group Inc. (NASDAQ:PCLN) will join the dwindling list of earnings reports slated for this holiday-shorted week on Wall Street, with the company scheduled to release fourth-quarter figures ahead of the open on Thursday.

Priceline pcln stockCurrently, the consensus is expecting earnings to rise about 13% to $10.01 per share on a 16.6% rise in revenue to $1.8 billion. Priceline has set revenue guidance at $1.7 billion for the quarter.

Historically, Priceline has blown past Wall Street’s estimates. In fact, the company has topped the consensus in the past 15 quarters by an average of 6%. As a result, EarningsWhipser.com reports that Priceline’s fourth-quarter whisper number arrives at $10.30 per share, well north of the consensus.

That said, actual earnings figures may take a back seat to international bookings when it comes to direction for PCLN stock. International bookings, which have grown at a significant pace in recent years, could be negatively impacted by a strong U.S. dollar, which gained 14% versus the euro last year.

Analysts don’t seem all that worried, however, according to data from Thomson/First Call. Heading into Thursday’s report, PCLN stock has attracted 19 “buy” ratings, four “holds,” and no “sell” ratings. On the other hand, the consensus 12-month price target of $1,312.50 represents a premium of only about 19% to PCLN’s current perch, leaving some wiggle room for price-target increases.

Turning to the options pits, we find a bit of skepticism levied against PCLN stock. Specifically, the shares February/March put/call open interest ratio comes in at a reading of 1.02, with puts just outnumbering calls among options set to expire within the next two months. This ratio dips slightly when we zero in on February options, coming in at 0.91.

Just a reminder, regular monthly February options expire at the end of this week.

2-17-2015 PCLN
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Overall, February option implieds are pricing in a potential post-earnings move of about 4.6% for PCLN stock. As such, the upper bound lies at $1,155.81, while the lower bound lies at $1,052.19. A rally would put PCLN stock just shy of its declining 200-day moving average, while a selloff would send PCLN back below its 50-day moving average.

2 Trades for PCLN Stock

Call Spread: For those traders willing to side with the brokerage community, a Mar $1,100/$1,140 bull call spread has a good chance of hitting a maximum return. At last check, this spread was offered at $13.60, or $1,360 per pair of contracts. Breakeven lies at $1,113.60, while a maximum profit of $26.40, or $2,640 per pair of contracts, is possible if PCLN stock closes at or above $1,140 when March options expire.

Put Spread: On the other hand, if you just aren’t feeling an outright bullish play on PCLN stock, or if the premiums are a bit too steep at the moment, you might consider a deep out-of-the-money Feb put sell — the $1,000 strike looks promising.

At the close of trading on Friday, the Feb $1,000 put was bid at $2.40, or $240 per contract. As with all put sell positions, you keep the initial premium received as long as PCLN stock trades above $1,000 ahead of February option expiration, which occurs this Friday. However, if PCLN trades at or below $1,000 ahead of expiration, you could be assigned 100 shares of PCLN stock at $1,000 each for each Feb $1,000 put sold.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/02/pcln-a-pair-of-bullish-trades-for-priceline-stock-ahead-of-earnings/.

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