Priceline (PCLN) Q3 was Disappointing Because Expectations were Lofty - Cowen

In a Q3 where hotel industry occupancy growth y/y was stable compared to Q2 at +3% in Europe, +1% in the Americas, and + 1% in APAC and Expedia organic room nights stayed was also stable at +28%, Priceline's (NASDAQ: PCLN) y/y room nights booked growth slowed by 400 bps vs. Q2.

The company announced that after Q4 it will not break out "domestic" bookings (Priceline.com brand, 12% of total bookings); while this metric is largely tied to air bookings, lack of disclosure going forward will make it harder to monitor "international" growth - the core Booking.com/Agoda brands.

However, Cowen analyst, Kevin Kopelman, sees three key factors pointing to the Priceline growth story being intact:

1) Ad spend was up only 11% y/y, vs. +20% in Q2, and grew slower than gross profit as Priceline made an active decision to move into more of a "harvest" mode in Q3 after more aggressive spend & growth in 1H

2) Q4 guide implies slight y/y room nights acceleration, with int'l bookings ex-f/x +24% at the high end (which the company typically beats), vs. a +23% guide & +25% results in Q3

3) Incremental room nights continue to increase. Priceline is on track to add >82M room nights booked in FY15E (to 428M for the year), vs. +75.5M in FY14A (to 346M);

Reiterating $1,500 price target and Outperform rating

For an analyst ratings summary and ratings history on The Priceline Group click here. For more ratings news on The Priceline Group click here.

Shares of The Priceline Group closed at $1311.15 yesterday.

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