Shares of Priceline Group Inc. shot up into record territory Tuesday in the aftermath of the online travel company’s fourth-quarter results, as Wall Street shrugged off another significant, but all-too-familiar, profit warning.
reported late Monday a profit that beat Wall Street expectations for at least the 28th straight quarter, based on available FactSet data.
And although Priceline said it expected adjusted earnings per share of $8.25 to $8.65 for the current quarter, which was below the FactSet consensus of $10.46, sell-side analysts seemed to disregard that warning and focus on the upbeat outlook for room-night and bookings growth. That is probably because Priceline has now warned of a big profit miss in 11 of the past 13 quarters, as it follows the strategy of underpromise and overdeliver.
Don’t miss:Priceline investors are being fooled again.
No less than 18 of the 34 analysts surveyed by FactSet raised their stock price targets, despite the sharp drop in the EPS consensus to $8.97.
The stock rallied 5.6% in active trade to close at $1,724.13, which was well above the Feb. 22 record close of $1,651.74, and the Feb. 23 all-time intraday high of $1,664.99. Volume of 1.7 million shares was about four times the full-day average of about 405,000 shares.
Analyst Scott Devitt at Stifel Nicolaus boosted his target to a Street-high $2,100, which is 22% above current levels, from $1,900, as he praised Priceline’s “strong” fourth-quarter results and first-quarter guidance for room-night growth of 20% to 25%, and for bookings of 19% to 24%, while giving a cursory mention of the profit warning.
RBC Capital analyst Mark Mahaney raised his stock-price target to $2,000 from $1,850, citing “intrinsically strong” results. He said he believed the profit warning was “entirely” due to the timing of Easter, which will be nearly three weeks later this year than it was last year.
Priceline’s strategy worked well, as it helped make the results look “strong.” In the company’s third-quarter report released Nov. 7, it said it expected adjusted EPS of $12.20 of $12.80, compared with the FactSet consensus at the time of about $14.52.
Analysts didn’t completely buy Priceline’s cry of wolf, as the FactSet consensus had only declined to $12.89. But although adjusted EPS of $14.21 was well above that consensus, it was below the pre-warning consensus of $14.52.
The strategy doesn’t always work. The stock has rallied on the day after the past three quarterly reports by an average of 5.5%, but dropped 7.5% the quarter before that.
The stock has now run up 13% over the past three months, while the S&P 500 index
has gained 7.4%.
View more information: https://www.marketwatch.com/story/pricelines-stock-soars-to-record-high-as-wall-street-shrugs-off-familiar-profit-warning-2017-02-28