Priceline and TripAdvisor shares battered on concerns the online travel market is peaking – MarketWatch









A pair of online travel stocks were being pummeled Wednesday, after quarterly earnings that left analysts divided and raised concerns that growing competition is saturating the market.

The online travel sector went through a period of consolidation in 2015 as bigger players snapped up rivals, creating a landscape dominated by Priceline Group Inc. and Expedia Inc. The two leaders have a roughly 95% share of the online travel agencies market, according to a July report from Harvard Business School.

But new niche players are still emerging, including room-sharing services like Airbnb and HomeAway, and even search giant Google












GOOGL, -0.82%











GOOG, -0.77%










with its Google Flights service, adding to the worry about saturation.

Priceline Group Inc. shares












PCLN, -8.15%










 slid 7.3% to lead S&P 500 decliners, while TripAdvisor Inc. stock












TRIP, +1.16%










 wasn’t far behind with a 2.9% drop. The moves weighed on a popular vehicle to bet on the retail sector, the SPDR S&P Retail ETF












XRT, -1.63%










which was on track for its steepest daily fall in about a month as the selloff in two of its components weighed.

Priceline late Tuesday reported EPS of $15.14, topping the FactSet consensus of $14.40. But bookings of $20.8 billion were below the consensus of $21.05 billion. Executives issued third-quarter adjusted earnings guidance of $32.40 per share to $34.10 per share, also below the consensus of $34.21.

Read also: When you should use travel booking sites like Expedia and Priceline — and when you shouldn’t

“Priceline’s guidance will inevitably divide investors into two camps: those that view this as structural headwinds from market saturation/competition (bears) and those that view this as transitory headwind from tough comps (bulls),” Raymond James analysts wrote in a note.

They are in the latter camp, recognizing that the tough comparisons will generate a midteens room night growth profile in the near term that is about 500 basis points below their prior expectations. But that will drive a roughly 1% hit to EPS as foreign exchange and the variable nature of advertising mute the impact.
























“As tough comps fade, we believe investors will resume focusing on the core elements of the story — a global supply leader that’s positioned for share gains and continued mid/high-teens EPS growth,” they wrote, reiterating an outperform rating on the stock.

See also: Move over, London and Paris — these unlikely foreign cities have seen a spike in popularity this summer

Related: Hotel-search site Trivago is bringing Silicon Valley to Germany

Susquehanna analysts also struck a bullish tone on the results, and said the same midteens room nights growth, while lower than before, is still strong and suggests the stock can rise further.

“We remain positive on PCLN’s secular opportunity to penetrate hotels and private accommodations room nights, which should continue to drive strong overall growth,” said analysts led by Shyam Patil. “While room night growth expectations are being readjusted downward, we believe room nights growth is likely to hold strong in the mid-to-high teens and would recommend buying on the pullback.”



















“We continue to believe that Priceline is well positioned to capture an increasing share of travel bookings in the company’s core international markets, which we expect will drive less deceleration in bookings growth than many expect over the coming quarters.”


Piper Jaffray analysts







Piper Jaffray said guidance was typical of Priceline’s conservative management’s approach to forecasting, and noted that Priceline has beaten the midpoint of EPS guidance by an average 11% in the past 14 quarters.

“We continue to believe that Priceline is well positioned to capture an increasing share of travel bookings in the company’s core international markets, which we expect will drive less deceleration in bookings growth than many expect over the coming quarters,” they wrote in a note.

Don’t miss: Priceline investors are being fooled again.
























Piper Jaffray rates the stock overweight with a $2,150 price target, equal to 14% above current trading levels.

TripAdvisor posted second-quarter earnings that beat expectations for profit and revenue. The company reported per-share earnings of 19 cents, down from 23 cents a year ago. Adjusted EPS came to 38 cents, ahead of the FactSet consensus of 30 cents.

Revenue rose to $424 million from $391 million, to top the FactSet consensus of $421 million.

The company said non-hotel revenue rose 31% to 498 million, while other hotel revenue fell 12% to $38 million.
























“We remain on the sidelines on TripAdvisor as the strength in non-hotel and less severe margin erosion are offset by a slow recovery in hotel monetization,” Raymond James analysts wrote in a note. “Mobile monetization and international competition are headwinds that we do not foresee abating in the near term,” they wrote, reiterating a market perform rating.

Other online travel stocks were mixed, with hotel booking site Trivago N.V.












TRVG, -2.35%










 down 2.9% and Expedia Inc.












EXPE, +0.26%










 up 0.8%.

Priceline shares have gained 30% in 2017, while TripAdvisor has fallen 17%. The S&P 500 has gained 10%.























Priceline and TripAdvisor shares battered on concerns the online travel market is peaking – MarketWatch