Priceline Group Inc (PCLN) is in the news today due to the sudden and unexpected resignation of CEO Darren Huston. Huston, who had been CEO since January 2014, was engaged in an inappropriate relationship with a company employee. The stock was halted on the news.
What this means for Priceline shareholders in the short term is unclear, but there’s bound to be some uncertainty in the markets. Current Chairman Jeffery Boyd was named Interim CEO, and will remain until the Board finds a new chief.
It makes sense that investors might sell Priceline stock on a kneejerk reaction. After all, news like this can’t be good for the company.
But before selling your shares or dismissing Priceline outright, take a step back and breathe … Now’s not the time to make decisions based on headlines. In fact …
Priceline Stock Is a Steal Right Here
This may be the perfect time to buy PCLN stock, which seems like it’s trading for a discount right now. Although, nominally speaking, it ain’t cheap (a single share will set you back more than $1,300). In market terms, that’s actually a bargain. Priceline goes for about 16.7 times forward earnings, which is less than the 17.8 forward price-earnings of the S&P 500.
I recently named PCLN one of the 10 best growth stocks to buy for retirement, citing its strong track record of growth, reasonable valuation and expected growth trajectory going forward. The economics of the online travel business are mighty attractive, and Priceline is the dominant player in a U.S. oligopoly.
Sure, if you had to characterize it one way or another, Huston’s abrupt departure is a net negative. He’s an experienced leader who formerly served as CEO of Microsoft (MSFT) Japan, and was once a Senior VP with Starbucks Corporation (SBUX).
But he’s replaceable. PCLN stock merely kept up with the S&P over his tenure, gaining 15.7% to the S&P’s 15.2%. Including dividends, the S&P was up nearly 20%.
Priceline continues to expand heavily overseas, which, while it leaves the company more vulnerable to foreign exchange risks, is definitely a net positive. After all, the U.S. still remains its largest market, and in periods where the dollar is stronger, Americans are more likely to splurge on international travel.
Bottom Line on PCLN
As Priceline stock owners know, first-quarter earnings for the travel site will be released on May 4. We’ll see then to what extent the horrendous events of the terrorist attacks in Brussels had on its results, but even that fallout is likely to be temporary.
Priceline has managed to beat earnings expectations in each of the last 16 quarters, including Q4 of 2015, when the Paris attacks occurred.
Priceline shares are a steal right now, plain and simple. And if there ends up being a prolonged selloff due to the CEO news, take this as a rare opportunity to pick up a quality stock at a discount.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
