Deutsche Bank Downgrades (PCLN) to Hold, Sees "Cold War" Hurting

December 10, 2012 7:14 AM EST
Get Alerts PCLN Hot Sheet
Price: $1,545.82 --0%

Rating Summary:
    31 Buy, 8 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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Deutsche Bank downgraded (NASDAQ: PCLN) from Buy to Hold with a price target of $710.00 (from $800.00).

The firm comments, "We've been firmly in the bull camp on PCLN since 2009, and our optimistic view is tempering on the margin in 2013. Shares remain attractively valued at 17.3x 2013 EPS, and we believe that Priceline could post a strong re-acceleration in international bookings growth ex-fx in 4Q and could see less marketing deleverage than in 3Q12, hence we would continue to own shares into the upcoming print. But beyond 4Q12 results, we see a more challenging environment as a result of our "Cold War" thesis, and don't expect PCLN's multiple to expand.

Commenting on a "Cold War" impacting the company going forward, the firm notes: "We see competitive dynamics heating up in PCLN's core European markets, which could cause the company’s industry-peak-margin to compress. Key drivers of the Cold War include: 1) Expedia is getting more aggressive with customer acquisition following its conversion rate improvement, 2) the pool of available leads from Google desktop queries is likely to start declining as searchers shift their behavior to mobile, which limits the effectiveness of SEM, a key growth driver for PCLN historically, and 3) Google may eventually go deeper into travel vertical search once its regulatory issues are resolved. In summary, we remain upbeat on PCLN’s best-in-class execution, but the favorable competitive environment the company enjoyed for the past couple years in its core markets may get less favorable."

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

Shares of closed at $659.10 yesterday.

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