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Priceline 3Q numbers - strong listing growth

Priceline reported numbers after hours. The company operates in the travel space. The investment thesis is simple, more people are going to use more online platforms to fulfil their experiences (which beats "things" in the modern era), and this business operates multiple websites and apps to facilitate that. Priceline operate and own the brands Booking.com, priceline.com, KAYAK, agoda.com, rentalcars.com, and OpenTable.

Total properties on their flagship platform (Booking.com) stand at 1,065,000, which is a 29 percent increase over the same time last year. Vacation rentals were the biggest growing category, up 39 percent year-on-year to stand at 529 thousand. So, around half of all the places you can book are actually not single hotel rooms at all. Hotel rooms still dominate the number of total rooms that you can book, the total single rooms out of the million plus properties is now 24.4 million. 16.9 million are hotel rooms and the other 7.5 million are either homes, or apartments, holiday villas and of course some other "unique" bookable abodes. So, whilst Airbnb is at some level a threat to their business, many people renting the actual rooms would be happy to do so across multiple platforms.

All their other platforms performed well, with the exception of OpenTable, which they impaired by 941 million Dollars. The restaurant booking platform is pretty simple to understand and use. 50 percent of all the bookings made on the platform are done via mobile phones. It looks like a pretty exciting business, clearly the group overpaid way back when. Priceline paid 2.6 billion Dollars, all cash, back in the middle of 2014, paying a 46 percent premium at the time. Not good.

Q3 saw revenues increase 25 percent to 18.5 billion Dollars, profits were up 22 percent to 3.6 billion. Non-Gaap net income was 31.18 Dollars a share, comfortably more than the Street had penciled in. I am not a fan of the company pointing out that the analyst community were just below 30 Dollars a share, let the analysts do their job, the company should not fret about their targets and earnings forecasts. Over the last quarter 150 million plus rooms were booked over the Northern Hemisphere summer period.

What amazes me about this business is that the local market, North America and in particular the US, is not big for locals. i.e. for some reason the US local is just getting accustomed to using the platform. Rather late than never, right? Whilst the US is often at the forefront of technology, some of their general receptiveness to certain platforms boggles the mind. Payments? Crumbs, those people still use checks. C'mon people, it is 2016, send money to my app, right?

There is some concerns that their lunch may be eaten by the likes of Facebook, or even Google. In fact Google, as the CEO Jeff Boyd points out on the conference call is a great partner, see: "And then Google is continuously experimenting and iterating with different ways of answering travel queries for their customers and we work closely with them. They've been a great partner for us. We'll continue to work with them as they add new channels in the future, new ad placements, and look for ways that it will work for us and for them."

Priceline have announced that Brett Keller will run the website priceline.com, an insider of around 17 years at the business. They also guided for the fourth quarter, not exactly the biggest quarter, for the full year the analyst community has the company making nearly 69 Dollars a share. And then for the next year around 80 Dollars of earnings a share. The stock ramped nearly 4 percent in the spot market and now is up another 5 percent post market. At the indicated opening price of 1556, the stock trades then around 19.45 times, hardly expensive for a company that is growing revenues by more than that number, percentage wise. i.e. they have a forward PEG of less than 1. This may not be a mainstream investment, for those of you who think that global travel is in the infancy of the new experience economy, this is definitely the investment for you. We like the theme, we really like the business as a long term investment, buy.


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