Tag Archives: EXPE

Two Stocks to Buy Tomorrow and Hold for (at Least) a Year

Shah GilaniShah GilaniShah Gilani

Editor’s Note: Normally you’d be seeing a fresh “Buy, Sell, or Hold” video from Shah today, but he’s traveling over the holiday weekend. He wanted to make sure folks got his two special buy recommendations for the short week ahead, so here’s Shah…

Very, very few companies qualify as “buy now and hold forever” stocks.

There are many more stocks you can buy now and hang onto for the long term – at least a year – with confidence, not to mention a shot at hefty profits.

From that long list of stocks, my team and I narrowed the list down by focusing on powerful trends, markets with strong, predictable rates of growth, and businesses benefitting from rapid high-tech tailwinds – and using these as guides to zero in on sector leaders.

My team and I are putting the finishing touches on that report now, and it’ll appear on the Total Wealth website the second it’s finished. But I wanted to share two of the stocks with everyone today, because I think they’re urgent buys post-Labor Day for folks looking to lock in maximum gains.

Here they are…

Stock No. 1: The Best Thing to Happen to Money in 5,000 Years

Square Inc. (NYSE: SQ) is a fintech leader, and fintech is one of the hottest sectors around today. Square has a leg up on most of the competition in the payments slice of the fintech market.

Payments is where the big advances – and big bucks – figure to be.

Square is a favorite of mine because it’s all about technological transformation. It’s about peer-to-peer payments. The company’s mobile-payments platform is about helping individuals start and grow their businesses. Its Cash App service is going to be a one-stop shop for everything related to finance and e-commerce.

There’s an addressable market that’s huge – huge and growing, I’d add – with no ceiling in sight, just open blue skies.

Square’s now about content, too. Its Tidal division is about artists creating, about ticketing, about merchandising, and, no surprise here, about making money. Square’s numbers are getting better all the time because the company is expanding its platforms and ecosystem. As we saw with Apple Inc. (NASDAQ: AAPL) – a buy-and-hold-forever stock if ever there was one – that’s a winning recipe for continually higher share prices.

Revenue grew 328.95% from 2017 to 2020, and it’s already up another 38.9% over the past 12 months, while the stock itself is up a market-crushing 61% in that time.

Stock No. 2: The Comeback Play That Keeps Going

I’ll tell you flat out: I’ve liked Expedia Group Inc. (NASDAQ: EXPE) for a long, long time despite the ups and downs of the pandemic.

It’s a meat-and-potatoes leisure stock with a juicy side of e-commerce.

One of the truly alluring features of Expedia is a brand portfolio that includes Brand Expedia, a full-service online travel brand with localized websites; Hotels.com for marketing and distributing lodging accommodations; Vrbo, an online marketplace for the alternative accommodations; Orbitz, Travelocity, and CheapTickets travel websites; Hotwire, which offers travel booking services; CarRentals.com, an online car rental booking service; Classic Vacations, a luxury travel specialist; and Expedia Cruise, a provider of advice for travelers booking cruises.

The company’s brand portfolio also comprises Expedia Partner Solutions, a business-to-business (B2B) brand that provides corporate-travel management, airlines, travel agents, online retailers, and financial institutions; and Egencia, which provides corporate-travel-management services. In addition, its brand portfolio consists of Trivago, a hotel metasearch website that sends referrals to online-travel companies and travel-service providers from hotel metasearch websites, and Expedia Group Media solutions. Further, the company provides online travel services through its Wotif.com, lastminute.com.au, travel.com.au, Wotif.co.nz, and lastminute.co.nz brands, loyalty programs, hotel accommodations and alternative accommodations, and advertising and media services.

The performance of the stock since the pandemic has been nothing short of extraordinary – especially in the face of losses as the country and the world shut down. The stock took a dive like everything else; it closed at $48.80 on March 20, 2020. But just 364 days later, March 19, 2021, it closed at an all-time high of $179.98 – a 268% move.

(Between us, it’s possible for smaller stocks to make bigger moves. I can tell you about a class of obscure stocks, one of which saw an exceptional 22,207% in less than a year – more on that here.)

Concerns about the delta variant coronavirus have helped push it back down to $146, which, in my view, is a great buy-in. Look to hold this one for a year, if not longer, as it bounces back and then some.

Like I said at the beginning, I’ve got a lot more stocks to talk about, including two “lotto-ticket” rocket-rider stocks. If you’re subscribed to my free Total Wealth e-letter, you can be among the first to get the report when it’s released. Truth be told, you’ll get a lot more than that, like my weekly “Buy, Sell, or Hold” videos and my “cheap stocks” picks, too. Just click here to go to my website; have a look at the stock research, leave us your e-mail address, and you’re in…

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Join the conversation. Click here to jump to comments…

Shah GilaniShah GilaniShah Gilani

About the Author

Browse Shah’s articles | View Shah’s research services

Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor’s 100 began trading on March 11, 1983, Shah worked in “the pit” as a market maker.

The work he did laid the foundation for what would later become the VIX – to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd’s TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company’s “listed” and OTC trading desks.

Shah founded a second hedge fund in 1999, which he ran until 2003.

Shah’s vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story – when others only get what the investment banks want them to see.

Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.

Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business’s Varney & Co.

… Read full bio

Uber Technologies Inc. Is a Massive Risk for Softbank

Uber Technologies Inc. has been valued at $48 billion after Softbank Group Corp. (OTCMKTS:SFTBF) has completed its purchase of 20% of the ride-hailing company.

A previous private funding round said the company was worth $68 billion, making this new round a “down round.” Anyone who bought shares at the $68 billion valuation — and then sold to Softbank — took a loss.

Since most of those exiting were early investors, however, they have taken huge profits. Founder and former-CEO Travis Kalanick sold 29% of his personal stake to Softbank and is now a billionaire. Menlo Ventures, First Round Capital and Benchmark Capital were also among the early backers to take profits. 

Kalanick ran Uber from a startup to a dominant player in the new world of app-based ride-hailing, which has been putting taxi services out of business around the world. But the company now faces challenges from well-heeled competitors and governments bent on regulating or even banning it.

Can Uber Be Saved?

The Softbank deal was designed to put a period on Uber’s past troubles and re-launch the company with $1.25 billion of fresh capital.

Uber tried further distract by announcing on January 7 that they have testing self-driving car chips from Nvidia Corp. (NASDAQ:NVDA), and will use them in their fleet of autonomous vehicles.

Former Expedia Inc. (NASDAQ:EXPE) CEO Dara Khosrowshahi is now in charge at Uber. He hopes to make people forget a hellish year during which the company faced allegations of sexual harassment, a backlash by government regulators, a “delete Uber” campaign, and revelations that it paid to cover up a massive data breach.

A lawsuit filed by Alphabet Inc. (NASDAQ:GOOGL) last February may be the company’s greatest headache. Google is accusing their former employee, Anthony Levandowski, of taking trade secrets from the Waymo self-driving car unit to Uber with him.

That trial has been delayed by the discovery of a letter from former Uber employee Ric Jacobs which alleged that Kalanick personally directed the theft of Waymo’s technology and spied on competitors. 

Is Uber Worth Saving?

Make no mistake. There is something worth saving at Uber, a service that powered 4 billion car rides in 2017. The company has a huge infrastructure, thousands of drivers, and enough brand loyalty to make the word “uber” a verb.

Khosrowshahi has recruited Barney Harford, former CEO of Orbitz — which Expedia bought in 2013 — as the new chief operating officer. Harford is charged with cutting costs so Uber can look profitable in an initial public offering planned for 2019. The company lost nearly $2.5 billion during the middle quarters of 2017 and has yet to announce its fourth-quarter results.

Along with their purchase, Softbank has brought Sprint Corp. (NYSE:S) CEO Marcelo Claure and Rajeev Misra, who runs Softbank’s $100 billion “Vision Fund,” to the Uber board, which now numbers 17 people. Softbank controls Sprint, which has pre-loaded Uber’s app onto its phones in the past.

The Bottom Line

Bigger than all of Uber’s other problems is the fact that its backers were greedy.

They delayed their planned IPO long enough for the company attracted big competitors like Didi Chuxing, a Chinese clone that claims to have powered 7.3 billion rides last year and driven Uber from that market.

Uber has also remained private through government backlash. Taxicab companies and liberal groups claim that Uber used private capital to subsidize the elimination of good (often union) jobs.

The City of London has refused to renew Uber’s operating license, adding itself to the list of places where Uber is banned. This list now includes Denmark, Bulgaria, and Hungary, as well as parts of the U.S., Canada, Australia and many European countries.

My own view is that Uber has missed its moment. And Softbank is going to find it got into the business too late. The Google lawsuit takes Uber out of the self-driving car market, Didi is going to keep it out of most of Asia, and politicians are going to war against it.

That is not a good position to be in. This is a corporate turnaround with all the risks of a venture capital investment. The Softbank “Vision Fund” may prove short-lived if Uber fails.

Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.

 

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Should You Buy The Dip In Priceline?

Priceline (NASDAQ:PCLN) has incurred a 15% correction during the past five months. A correction of this magnitude is quite unusual for this high-growth stock. In addition, every correction in the past has turned out to be an excellent investing opportunity. Therefore, the big question is whether investors should take advantage of the latest dip as well.

First of all, the recent correction has resulted from the disappointing guidance of management in the last two earnings reports. While the company exceeded analysts estimates by a wide margin in both of these reports, it offered guidance that was below the analysts consensus. More precisely, in the latest earnings report, management stated that it expected Q4 earnings per share (EPS) between $13.4 and $14.0, while the market was expecting EPS around $15. Therefore, there seems to be a good reason behind the recent correction in the stock.

Nevertheless, investors should not miss the big picture. In the short term, the earnings of Priceline are likely to remain under pressure due to its investment on developing its vacation rental business and its heavy advertising for the expansion of Booking.com in several new countries. However, investors should realize that the online travel giant will continue to benefit from favorable secular trends for decades. As millennials are tech-savvy, an increasing number of consumers switches from traditional travel agents to online travel agents every year. Given that the global travel industry is a highly fragmented market worth $1.3 billion, one can understand the growth potential of Priceline. Moreover, while there seem to be many online travel agencies, such as Kayak, Agoda and Booking.com, all these are owned by Priceline. To make a long story short, most online travel agencies are owned by either Priceline or Expedia (NASDAQ:EXPE), and hence these two online giants essentially operate in a duopoly. As a result, the two companies face very weak competition and thus enjoy wide margins.

The strong secular trend that is behind the impressive growth trajectory of Priceline is clearly reflected in the increasing share of online bookings. While the global travel business keeps growing every year, online bookings grow at a much faster pace. As a result, online bookings have grown their market share from 11% in 2004 to 35% in 2015, with no signs of fatigue yet. This favorable trend has helped Priceline grow its revenues by about 15% per year in the last two years.

Thanks to this secular trend, Priceline has outperformed the S&P (SPY) in almost any time horizon one can check out. For instance, it has outperformed the S&P in the past five years (174% vs. 83%) and in the last two years (39% vs. 31%).

It is also remarkable that Priceline spends minimum amounts on capital expenses every year. In fact, its capital expenses are much lower than 10% of its operating cash flows. As a result, the company enjoys strong and rising free cash flows every year. The fact that the company has grown its free cash flows by more than 20% per year for more than a decade confirms the strength of its business model. This is in sharp contrast to other companies, such as brick-and-mortar retailers, which spend heavy amounts every year in order to fund their expansion.

While the minimal capital expenses are positive for Priceline, they also indicate that there are low barriers to new entrants. In other words, the company runs the risk of seeing new competitors enter its business. However, the online giant has a significant moat, namely its dominant presence. As it is by far the largest online agent, most consumers use its sites. Therefore, most hotels are likely to prefer to cooperate with Priceline in order to have a reach to the majority of consumers. This virtuous cycle constitutes the moat of Priceline against potential new entrants.

It is also worth noting that Priceline does not pay a dividend. While this feature may seem negative to dividend-oriented investors, it is actually a very positive characteristic. More specifically, it confirms that it is much more profitable for the company to reinvest its earnings on its business than to distribute them. In other words, management sees ample growth potential for the foreseeable future. In fact, whenever the company initiates a dividend, its stock will probably plunge, as such a move will signal that the fast-growth era is heading to an end. Conversely, as long as the company does not pay a dividend, investors can safely conclude that management sees ample growth ahead.

Some investors may claim that Priceline is already present in 225 countries and hence it has limited growth potential. However, the company seems to have ample room for further growth in the markets it is already present in. Thats why its overall growth does not show any signs of fatigue. For instance, while the overall economy of Greece is still suffering, the country has been enjoying tremendous growth in its tourism in the last 8 years. The number of visitors increases by about one million per year, and hence the total number of annual visitors now stands at almost 30 million, or 3 times the population of the country. Booking.com is running an aggressive marketing campaign in the country, as it sees great growth potential in the region. While Priceline has been present in the country for years, there is ample room for future growth, as there are numerous hotels that still use a brick-and-mortar travel agent.

I know this first hand because my wife is an expert in hotels. While we have two marvelous houses, one in Athens and one in the gorgeous island of Kefalonia, my wife insists on spending 5-10 nights per year at hotels in these two areas just to feel the extraordinary atmosphere of hotels. As a result, I know first hand that the majority of hotels in this country still operate with a brick-and-mortar travel agent, and hence, there is high growth potential for Priceline in the country. Therefore, the fact that the company has been present in the country for years does not mean it does not have room for further growth.

It is also admirable that Priceline has a net debt (as per Buffett, net debt = total liabilities cash receivables) of only $4.2 billion. This is equal to the free cash flow of just one year, and hence, the company can be safely viewed as essentially debt-free. Therefore, whenever Priceline’s growth stumbles and the stock falls, the company has ample room to leverage its balance sheet and support its stock via aggressive share repurchases. This is an extra margin of safety for shareholders.

On the other hand, investors should be well aware of the high volatility of this stock. If they cannot stomach this pronounced volatility, they should not invest in the stock. The high volatility results from the rich valuation of the stock, which is currently trading at a trailing P/E of 24.9. In other words, the market has already priced the growth of the company for the next few years in the stock. Consequently, any unforeseen headwind, such as a disappointing earnings report or guidance, is likely to cause the stock to plunge. I do not consider such setbacks significant for the long-term trajectory of the stock, but those who cannot stomach high volatility should certainly take this parameter into account.

To sum up, the recent correction of Priceline has resulted from its disappointing short-term guidance. However, the company has an exceptional record of EPS growth. Even better, it will continue to benefit from the above-mentioned secular trends for several years. As a result, it is likely to continue to outperform the S&P for the foreseeable future, and hence, investors should take advantage of the recent dip.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in PCLN over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

SeekingAlphaAbout this article:ExpandAuthor payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.Tagged: Investing Ideas, Long Ideas, Services, General EntertainmentWant to share your opinion on this article? Add a comment.Disagree with this article? Submit your own.To report a factual error in this article, click here

Should You Buy The Dip In Priceline?

Priceline (NASDAQ:PCLN) has incurred a 15% correction during the past five months. A correction of this magnitude is quite unusual for this high-growth stock. In addition, every correction in the past has turned out to be an excellent investing opportunity. Therefore, the big question is whether investors should take advantage of the latest dip as well.

First of all, the recent correction has resulted from the disappointing guidance of management in the last two earnings reports. While the company exceeded analysts estimates by a wide margin in both of these reports, it offered guidance that was below the analysts consensus. More precisely, in the latest earnings report, management stated that it expected Q4 earnings per share (EPS) between $13.4 and $14.0, while the market was expecting EPS around $15. Therefore, there seems to be a good reason behind the recent correction in the stock.

Nevertheless, investors should not miss the big picture. In the short term, the earnings of Priceline are likely to remain under pressure due to its investment on developing its vacation rental business and its heavy advertising for the expansion of Booking.com in several new countries. However, investors should realize that the online travel giant will continue to benefit from favorable secular trends for decades. As millennials are tech-savvy, an increasing number of consumers switches from traditional travel agents to online travel agents every year. Given that the global travel industry is a highly fragmented market worth $1.3 billion, one can understand the growth potential of Priceline. Moreover, while there seem to be many online travel agencies, such as Kayak, Agoda and Booking.com, all these are owned by Priceline. To make a long story short, most online travel agencies are owned by either Priceline or Expedia (NASDAQ:EXPE), and hence these two online giants essentially operate in a duopoly. As a result, the two companies face very weak competition and thus enjoy wide margins.

The strong secular trend that is behind the impressive growth trajectory of Priceline is clearly reflected in the increasing share of online bookings. While the global travel business keeps growing every year, online bookings grow at a much faster pace. As a result, online bookings have grown their market share from 11% in 2004 to 35% in 2015, with no signs of fatigue yet. This favorable trend has helped Priceline grow its revenues by about 15% per year in the last two years.

Thanks to this secular trend, Priceline has outperformed the S&P (SPY) in almost any time horizon one can check out. For instance, it has outperformed the S&P in the past five years (174% vs. 83%) and in the last two years (39% vs. 31%).

It is also remarkable that Priceline spends minimum amounts on capital expenses every year. In fact, its capital expenses are much lower than 10% of its operating cash flows. As a result, the company enjoys strong and rising free cash flows every year. The fact that the company has grown its free cash flows by more than 20% per year for more than a decade confirms the strength of its business model. This is in sharp contrast to other companies, such as brick-and-mortar retailers, which spend heavy amounts every year in order to fund their expansion.

While the minimal capital expenses are positive for Priceline, they also indicate that there are low barriers to new entrants. In other words, the company runs the risk of seeing new competitors enter its business. However, the online giant has a significant moat, namely its dominant presence. As it is by far the largest online agent, most consumers use its sites. Therefore, most hotels are likely to prefer to cooperate with Priceline in order to have a reach to the majority of consumers. This virtuous cycle constitutes the moat of Priceline against potential new entrants.

It is also worth noting that Priceline does not pay a dividend. While this feature may seem negative to dividend-oriented investors, it is actually a very positive characteristic. More specifically, it confirms that it is much more profitable for the company to reinvest its earnings on its business than to distribute them. In other words, management sees ample growth potential for the foreseeable future. In fact, whenever the company initiates a dividend, its stock will probably plunge, as such a move will signal that the fast-growth era is heading to an end. Conversely, as long as the company does not pay a dividend, investors can safely conclude that management sees ample growth ahead.

Some investors may claim that Priceline is already present in 225 countries and hence it has limited growth potential. However, the company seems to have ample room for further growth in the markets it is already present in. Thats why its overall growth does not show any signs of fatigue. For instance, while the overall economy of Greece is still suffering, the country has been enjoying tremendous growth in its tourism in the last 8 years. The number of visitors increases by about one million per year, and hence the total number of annual visitors now stands at almost 30 million, or 3 times the population of the country. Booking.com is running an aggressive marketing campaign in the country, as it sees great growth potential in the region. While Priceline has been present in the country for years, there is ample room for future growth, as there are numerous hotels that still use a brick-and-mortar travel agent.

I know this first hand because my wife is an expert in hotels. While we have two marvelous houses, one in Athens and one in the gorgeous island of Kefalonia, my wife insists on spending 5-10 nights per year at hotels in these two areas just to feel the extraordinary atmosphere of hotels. As a result, I know first hand that the majority of hotels in this country still operate with a brick-and-mortar travel agent, and hence, there is high growth potential for Priceline in the country. Therefore, the fact that the company has been present in the country for years does not mean it does not have room for further growth.

It is also admirable that Priceline has a net debt (as per Buffett, net debt = total liabilities cash receivables) of only $4.2 billion. This is equal to the free cash flow of just one year, and hence, the company can be safely viewed as essentially debt-free. Therefore, whenever Priceline’s growth stumbles and the stock falls, the company has ample room to leverage its balance sheet and support its stock via aggressive share repurchases. This is an extra margin of safety for shareholders.

On the other hand, investors should be well aware of the high volatility of this stock. If they cannot stomach this pronounced volatility, they should not invest in the stock. The high volatility results from the rich valuation of the stock, which is currently trading at a trailing P/E of 24.9. In other words, the market has already priced the growth of the company for the next few years in the stock. Consequently, any unforeseen headwind, such as a disappointing earnings report or guidance, is likely to cause the stock to plunge. I do not consider such setbacks significant for the long-term trajectory of the stock, but those who cannot stomach high volatility should certainly take this parameter into account.

To sum up, the recent correction of Priceline has resulted from its disappointing short-term guidance. However, the company has an exceptional record of EPS growth. Even better, it will continue to benefit from the above-mentioned secular trends for several years. As a result, it is likely to continue to outperform the S&P for the foreseeable future, and hence, investors should take advantage of the recent dip.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in PCLN over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

SeekingAlphaAbout this article:ExpandAuthor payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.Tagged: Investing Ideas, Long Ideas, Services, General EntertainmentWant to share your opinion on this article? Add a comment.Disagree with this article? Submit your own.To report a factual error in this article, click here

Should You Buy The Dip In Priceline?

Priceline (NASDAQ:PCLN) has incurred a 15% correction during the past five months. A correction of this magnitude is quite unusual for this high-growth stock. In addition, every correction in the past has turned out to be an excellent investing opportunity. Therefore, the big question is whether investors should take advantage of the latest dip as well.

First of all, the recent correction has resulted from the disappointing guidance of management in the last two earnings reports. While the company exceeded analysts estimates by a wide margin in both of these reports, it offered guidance that was below the analysts consensus. More precisely, in the latest earnings report, management stated that it expected Q4 earnings per share (EPS) between $13.4 and $14.0, while the market was expecting EPS around $15. Therefore, there seems to be a good reason behind the recent correction in the stock.

Nevertheless, investors should not miss the big picture. In the short term, the earnings of Priceline are likely to remain under pressure due to its investment on developing its vacation rental business and its heavy advertising for the expansion of Booking.com in several new countries. However, investors should realize that the online travel giant will continue to benefit from favorable secular trends for decades. As millennials are tech-savvy, an increasing number of consumers switches from traditional travel agents to online travel agents every year. Given that the global travel industry is a highly fragmented market worth $1.3 billion, one can understand the growth potential of Priceline. Moreover, while there seem to be many online travel agencies, such as Kayak, Agoda and Booking.com, all these are owned by Priceline. To make a long story short, most online travel agencies are owned by either Priceline or Expedia (NASDAQ:EXPE), and hence these two online giants essentially operate in a duopoly. As a result, the two companies face very weak competition and thus enjoy wide margins.

The strong secular trend that is behind the impressive growth trajectory of Priceline is clearly reflected in the increasing share of online bookings. While the global travel business keeps growing every year, online bookings grow at a much faster pace. As a result, online bookings have grown their market share from 11% in 2004 to 35% in 2015, with no signs of fatigue yet. This favorable trend has helped Priceline grow its revenues by about 15% per year in the last two years.

Thanks to this secular trend, Priceline has outperformed the S&P (SPY) in almost any time horizon one can check out. For instance, it has outperformed the S&P in the past five years (174% vs. 83%) and in the last two years (39% vs. 31%).

It is also remarkable that Priceline spends minimum amounts on capital expenses every year. In fact, its capital expenses are much lower than 10% of its operating cash flows. As a result, the company enjoys strong and rising free cash flows every year. The fact that the company has grown its free cash flows by more than 20% per year for more than a decade confirms the strength of its business model. This is in sharp contrast to other companies, such as brick-and-mortar retailers, which spend heavy amounts every year in order to fund their expansion.

While the minimal capital expenses are positive for Priceline, they also indicate that there are low barriers to new entrants. In other words, the company runs the risk of seeing new competitors enter its business. However, the online giant has a significant moat, namely its dominant presence. As it is by far the largest online agent, most consumers use its sites. Therefore, most hotels are likely to prefer to cooperate with Priceline in order to have a reach to the majority of consumers. This virtuous cycle constitutes the moat of Priceline against potential new entrants.

It is also worth noting that Priceline does not pay a dividend. While this feature may seem negative to dividend-oriented investors, it is actually a very positive characteristic. More specifically, it confirms that it is much more profitable for the company to reinvest its earnings on its business than to distribute them. In other words, management sees ample growth potential for the foreseeable future. In fact, whenever the company initiates a dividend, its stock will probably plunge, as such a move will signal that the fast-growth era is heading to an end. Conversely, as long as the company does not pay a dividend, investors can safely conclude that management sees ample growth ahead.

Some investors may claim that Priceline is already present in 225 countries and hence it has limited growth potential. However, the company seems to have ample room for further growth in the markets it is already present in. Thats why its overall growth does not show any signs of fatigue. For instance, while the overall economy of Greece is still suffering, the country has been enjoying tremendous growth in its tourism in the last 8 years. The number of visitors increases by about one million per year, and hence the total number of annual visitors now stands at almost 30 million, or 3 times the population of the country. Booking.com is running an aggressive marketing campaign in the country, as it sees great growth potential in the region. While Priceline has been present in the country for years, there is ample room for future growth, as there are numerous hotels that still use a brick-and-mortar travel agent.

I know this first hand because my wife is an expert in hotels. While we have two marvelous houses, one in Athens and one in the gorgeous island of Kefalonia, my wife insists on spending 5-10 nights per year at hotels in these two areas just to feel the extraordinary atmosphere of hotels. As a result, I know first hand that the majority of hotels in this country still operate with a brick-and-mortar travel agent, and hence, there is high growth potential for Priceline in the country. Therefore, the fact that the company has been present in the country for years does not mean it does not have room for further growth.

It is also admirable that Priceline has a net debt (as per Buffett, net debt = total liabilities cash receivables) of only $4.2 billion. This is equal to the free cash flow of just one year, and hence, the company can be safely viewed as essentially debt-free. Therefore, whenever Priceline’s growth stumbles and the stock falls, the company has ample room to leverage its balance sheet and support its stock via aggressive share repurchases. This is an extra margin of safety for shareholders.

On the other hand, investors should be well aware of the high volatility of this stock. If they cannot stomach this pronounced volatility, they should not invest in the stock. The high volatility results from the rich valuation of the stock, which is currently trading at a trailing P/E of 24.9. In other words, the market has already priced the growth of the company for the next few years in the stock. Consequently, any unforeseen headwind, such as a disappointing earnings report or guidance, is likely to cause the stock to plunge. I do not consider such setbacks significant for the long-term trajectory of the stock, but those who cannot stomach high volatility should certainly take this parameter into account.

To sum up, the recent correction of Priceline has resulted from its disappointing short-term guidance. However, the company has an exceptional record of EPS growth. Even better, it will continue to benefit from the above-mentioned secular trends for several years. As a result, it is likely to continue to outperform the S&P for the foreseeable future, and hence, investors should take advantage of the recent dip.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in PCLN over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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