Should I Buy Priceline? 3 Pros, 3 Cons

by James Brumley | August 14, 2013 11:17 am

Priceline’s (PCLN[1]) TV commercials have been some of the most fun — and most memorable — advertisements that television watchers have seen recently, perhaps second only to Progressive Insurance’s TV spots featuring the lovable “Flo.” William Shatner has been perfect as the Priceline “Negotiator,” and newcomer Kaley Cuoco has seamlessly stepped right in as the Negotiator’s daughter.

Entertaining television ads don’t inherently make for a great company, though, nor for a great investment. So should you buy Priceline stock for its actual merits? To see, we’ll take a look at the stock’s pros and cons:

But First, for Perspective …

When Priceline announced Q2’s earnings late last week, not only did year-over-year earnings grow for about the umpteenth time in a row, but the company also posted its 14th straight earnings beat. The analyst community was looking for $9.36, vs. Q2 2012’s $7.85. What the company turned in was an impressive $9.70, up 23% from the year-ago figure.

Last quarter’s impressive results were just a slice of what’s become a long string of success for the company. Indeed, the results have been so good for so long, it wouldn’t be off-base to start wondering if — or when — the other shoe is going to drop.

With that as the backdrop, the camps sitting on either side of the Priceline stock debate each have three key arguments to make their bullish or bearish case:



Bottom Line

Yes, the red-hot growth the company has been doling out will eventually slow, but it’s likely to be years before overseas markets are fully tapped by online booking sites.

Moreover, Priceline has proven it’s more than skilled at fending off competition. It’s also proven it knows how to acquire and cultivate non-namesake sites; the company now owns, and is doing well with it.

The stock reaching the $1,000 mark might well kick-start a dead period in the buying interest, but that won’t be a permanent condition. This is a solid, long-term growth story, and given enough time, the market always rewards reliable performers.

So should you buy Priceline stock? Yes — for now, it’s clear PCLN is still a solid buy.

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

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