Priceline (PCLN) has followed the airline industry down the drain. Now that the stock has undergone a 30%+ correction, however, Citi analyst Mark Mahaney is delighted to upgrade the shares to BUY:
We attribute the correction to two factors: 1) Enthusiasm had pushed the shares in early May to a peak 19X EBITDA multiple that was not sustainable in a weakening market; & 2) Increasing signs of European travel weakness as Europe accounts for almost 60% of PCLN bookings. Now, however, we see PCLN shares as offering a very attractive ~28% upside to our $130 PT. Hence the Upgrade.
5 factors, according to Mahaney, will drive PCLN back to $130:
- Intrinsically Attractive Valuation
- European Economic Weakness Now “Priced”/modelled In
- Dominant Internat’l Growth Drivers Are Secular & New Market, NOT Cyclical
- Strengthening U.S. Market Position
- Enhanced Q3 Visibility
Citi upgrades Priceline (PCLN) from Hold to BUY, target $130.
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