Price: $64 1/4
Estimates (Dec) 1998A 1999E 2000E
EPS: d$0.63 d$0.40 d$0.26
P/E: NM NM NM
EPS Change (YoY): NM NM
Q3 EPS (Sep): d$0.18 d$0.10
Cash Flow/Share: NA NA NA
Price/Cash Flow: NM NM NM
Dividend Rate: Nil Nil Nil
Dividend Yield: Nil Nil Nil
Opinion & Financial Data
Investment Opinion: D-2-1-9
Mkt. Value / Shares Outstanding (mn): $12,545 / 193
Book Value/Share (Jun-1999): $1.20
Price/Book Ratio: 53.5x
ROE 1999E Average: NM
LT Liability % of Capital: 1.8%
Est. 5 Year EPS Growth: NM
Stock Data
52-Week Range: $53 1/2-$165
Symbol / Exchange: PCLN / OTC
Options: None
Institutional Ownership-Spectrum: NA
ML Industry Weightings & Ratings**
Strategy; Weighting Rel. to Mkt.:
Income: Underweight (07-Mar-1995)
Growth: Overweight (07-Mar-1995)
Income & Growth: Overweight (07-Mar-1995)
Capital Appreciation: In Line (28-Jan-1999)
Market Analysis; Technical Rating: Below Average (28-Dec-1998)
**The views expressed are those of the macro department and do not
necessarily coincide with those of the Fundamental analyst.
For full investment opinion definitions, see footnotes.
Investment Highlights:
* We are resuming coverage of PCLN with an
Accumulate/ Buy rating.
* Priceline.com?s fundamentals remain strong.
Revenue increased 126% sequentially in Q2 to
$112 million, crushing our estimate of $66 million.
The increase was driven by strong new customer
acquisition (850,000 vs. 530,000 in Q1) and
increased fill rates (45% vs. 27% in Q1).
* Importantly, Priceline?s key value propositions to
both consumers (cheap prices) and suppliers (low-cost
distribution channel that protects brand and
fare structure) appear to be proving themselves.
* Based on the Q2 strength, we raised our revenue
estimates significantly, from $300 mm and
$450mm in 2000 to $475mm in 1999 and $750mm
in 2000. Our Q3 estimate is now $145mm.
* The company raised $64mm through an equity
offering in August and added Continental as an
airline ticket supplier. It continues to make
progress in its hotel, financial services, and new car
businesses, although these still contribute a small
percentage of gross profit. It also announced plans
to launch rental car and grocery services.
* As a result of seasonality in the airline ticket
business, we do not expect the company to exceed
our Q3 revenue estimate by as wide a margin as
our Q2 estimate, Sequential growth of offers and
revenue, which should still be a strong 30%-40%,
is not likely to reaccelerate until Q1.
Comment
United States
Internet Software & Services
6 October 1999
Henry Blodget
First Vice President
Daniel Good
Industry Analyst
Priceline.com
Resuming Coverage with Accumulate / Buy ACCUMULATE
Long Term
BUY Reason for Report: Resuming Coverage
Merrill Lynch & Co.
Global Securities Research & Economics Group
Global Fundamental Equity Research Department
RC#20127914
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Priceline.com Inc
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