New Trade: Long Priceline ($PCLN) & Short AOL ($AOL)

By: ispeculatornew
Date posted: 01.20.2014 (3:00 am) | Write a Comment  (2 Comments)

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After receiving a lot of feedback when I went public with my view of Yahoo, I did short it last Monday which ended up being good timing as the COO was fired later that week which set the stock back a bit. Overall the performance has been good but it’s still very early obviously…!

As will be the case all year, my long & short stock picks will be available to see in my live spreadsheet:

http://www.intelligentspeculator.net/livetrades

Today, as was the case last week, I’m trading two tech stocks that are both part of the “original internet stocks era”.

You can see the numbers for both companies here:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
AOLAOL Inc50.7731.922.1212.7-0.473.9528.660.6324.06N/AN/A
PCLNpriceline.com Inc1178.0433.7723.241.9120.794.67125.991.26105.5632.5476.16

As is the case for most of my trades, I see a major discrepancy here between the P/E and the growth that both of these stocks are able to generate. I think we’ll agree that the growth story is very different here.

AOL Revenue (Quarterly YoY Growth) Chart

AOL Revenue (Quarterly YoY Growth) data by YCharts

pclnLong Priceline (PCLN)

Ahh Priceline has been an incredible value for over a decade now. It’s been a strong brand and company that has been able to impress year after year. You’d think that such a streak would eventually come to an end and it will but I’m personally expecting to keep up for some time as the online travel industry continues to grow. It is trading at a reasonable P/E given its recent growth and I personally think the risk of a bad surprise is very small with PCLN which is a big benefit.

PCLN

Next earnings release: February 7th 2014

aolShort AOL (AOL)

Ahh AOL is one if not the stock that I’ve struggled the most trading since running this blog. After selling some assets and making some solid acquisitions, the stock has performed very well, especially when you compare the actual financial results. I’m betting that won’t keep up. Tim Armstrong has done a good job but some of those acquisitions are not working out as well as you’d expect and the much hyped “local” strategy that revolved around “Patch” looks like it’s being declared a failure.

AOL

Next earnings release: February 26th 2014

Disclaimer: No positions on Priceline (PCLN) or AOL (AOL) but I will initiate the trade on the open today

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2 Comments

  1. Comment by Johan Lindén — February 13, 2014 @ 1:53 am

    How come you chose Priceline and not Tripadvisor which you ranked higher in your round-up?

    Tripadvisor is a company which has your favorite buying trait, an eco-system. And strong enough to be able to compete against Facebook in its niche.

  2. Comment by IS — February 13, 2014 @ 7:43 pm

    @Johan – Very good question… 2 main answers – I’m trying to avoid opening trades on stocks that are reporting earnings just a few days later which TRIP was.

    Also, while TRIP is absolutely near the top of my rankings, there is a bit more downside risk than a stock like PCLN so sometimes the match is better with a lower ranked stock

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