New Trade: Long Priceline ($PCLN) & Short Expedia ($EXPE)

By: ispeculatornew
Date posted: 02.05.2016 (3:00 am) | Write a Comment  (0 Comments)

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This morning I will be opening my 4th long and short trade of the year. Despite starting later than usual, it does look like I will be able to have all of the funds invested very shortly (which happens when I have 7 live trades). As is always the case you can see the existing live trades here:

http://www.intelligentspeculator.net/livetrades

Today’s trade is one between two very different online brands that do trade at very comparable P/E ratios. I strongly considered doing a PCLN-FIT trade but ended up changing not because I’m optimistic about Fitbit’s long term prospects but I’d be very worried about shorting the stock ahead of its Q4 quarterly results which could include very large holiday sales. So instead I’ve decided to do a PCLN-EXPE trade which I’m pretty sure I’ve done in the past.  Let’s start off by looking at the numbers:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
PCLNPriceline Group Inc/The1069.121.615.54-17.7124.274.34169.931.13161.4125.9741.93
EXPEExpedia Inc99.933.9717.52-22.5320.84.1118.81.1244.7114.6114.5

And the chart that I always look at when doing these trade, the quarterly y/y sales growth:

EXPE_PCLN_chart

$PCLNLong Priceline (PCLN)

Priceline is a star in every single way and has been able to extend its lead as the dominant online travel player (especially in the US). As you know, I’m a big believer in TripAdvisor (TRIP) but it was certainly telling to see TRIP’s stock jump so much when it announced that PCLN would be using its instant booking platform. TRIP has been able to sustain high growth in all meaningful metrics for over a decade now and I see no signs of that stopping. Priceline has several very strong brands (Priceline, Booking.com, Kayak, Agoda, RentalCars.com and OpenTable) and continues to be smart in managing its assets.

I usually add a 1 year chart for stocks here but I just wanted to give you a perspective of how Priceline has performed, here is a 10 year chart with PCLN compared to the S&P500 (SPY) and Nasdaq-100 (QQQ):

EXPE_PCLN_SPY_QQQ_chart

Next earnings: February 17th 2016

$EXPEShort Expedia (EXPE)

I am actually not that negative about Expedia and I think that in a world where very few names will likely do well, Expedia will certainly be part of that select group. That being said, I do not see a reason to think that Expedia can justify a higher P/E valuation than Priceline given its history

trends_pcln_expe

Credit: Google Trends

EXPE_PCLN_chart (1)

Next earnings: February 10th

Disclaimer: This trade on PYPL-RAX will be done on today’s opening.
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