Cantor Fitzgerald Maintains Buy On Priceline Despite Poor Outlook Overshadowed Solid Q1 Results

Cantor Fitzgerald maintained its Buy rating on Priceline Group Inc

saying that the company's weak outlook for the second quarter reflects its conservatism in an uncertain macro climate and includes number of non-recurring factors. The online travel and restaurant booking company's second quarter outlook calls for 11-18 percent growth in gross bookings versus consensus of 18.6 percent. Gross profit and EPS guidance is $2.281 billion - $2.428 billion and $11.60 - $12.50, respectively and lower than consensus estimate of $2.501 billion/$14.96. The company's weaker-than-expected outlook stems from shift in timing of Easter, Euro Cup and Ramadan. Analyst Naved Khan estimate about 400bps hit to second quarter bookings growth from these issues. Further, the company expects to spend more on U.S. marketing in the second quarter. "We view these issues to be transitory, not a sign of weakening fundamentals," Khan wrote in a note. For the second quarter, the brokerage currently expects $2.43 billion in gross profit, and $12.49 in EPS with 18 percent growth in total bookings. Earlier, it expected $2.51 billion in gross profit, $14.98 in EPS, and 21 percent in bookings growth. For FY16, the brokerage cut its estimate for gross profit to $10.21 billion from $10.70 billion and EPS to $67.91 from $69.89. Meanwhile, the company reported strong first quarter results, which topped Street expectations on every metric, driven by robust growth in room nights. Room nights grew 31 percent in the first quarter versus 27 percent in the fourth quarter of 2015. "It is also worth noting that PCLN's room nights growth rate exceeded Expedia Inc

's organic growth, which we estimate at 24% Y/Y in 1Q,suggesting little impact in the form of direct competition between the two," Khan noted. Priceline now has about 900K properties (including about 420K vacation rentals), up from about 850Kproperties in mid Feb. which bodes well for selection and bookings growth. Shares of Priceline were down 0.51 percent to $1,246.71. Khan cut his price target to $1,525 from $1,550.