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Investors Should Pick Priceline in 2013: Merrill Lynch

Tickers in this article: AAPL EXPE GOOG KYAK PCLN

NEW YORK (TheStreet) -- -Priceline(PCLN) could be a good bet for investors in 2013, according to Bank of America Merrill Lynch, which upgraded the online travel specialist to buy on Thursday.

The investment bank cited Priceline's Booking.com business, ongoing strength in international markets, the potential for a modest European recovery and its recent surprise deal for Kayak(KYAK) as positives.

Set against this backdrop, BofA Merrill Lynch raised its Priceline price objective to $770 from $690.

The upgrade helped lift Priceline's stock during Thursday's trading. Shares of the Norwalk, Conn.-based firm were up 2.38% to $653.62 in early afternoon trading, easily outpacing Nasdaq's gain of 0.03%. The stock also crossed its 200-day moving average of $648.54.

"We see more near-term potential to 2013 estimates than rival Expedia(EXPE) ," wrote BofA Merrill Lynch analyst Justin Post, in a note released on Thursday.

For the company's current fiscal fourth quarter, BofA Merrill Lynch said it expects Priceline to report earnings of $6.68 a share, compared to Wall Street's forecast of $6.52. For fiscal 2013, the investment bank increased its Priceline earnings estimate from $38.40 to $38.67 a share and its revenue forecast from $6.31 billion to $6.36 billion. Analysts surveyed by Thomson Reuters expect earnings of $37.45 a share and revenue of $6.275 billion.

"Aided by an increasing mix of APAC (Asia Pacific), LATAM (Latin America), and Booking.com's U.S. bookings, we see a company with an attractive growth profile, estimate upside potential and a reasonable multiple with room to expand," wrote Post. "If Europe were to recover in 2H, Priceline is the most exposed in our coverage group as a percentage of profit."

Clearly keen to drive both organic and inorganic growth, Priceline recently made a shock $1.8 billion move to acquire Kayak, seen as a shrewd piece of M&A that will build on its successful purchases of Booking.com in 2005 and hotel reservation service Agoda in 2007.

"While the deal is expected to be neutral to 2013 EPS and isn't that significant (cost is around 5% of Priceline's market cap), we have a favorable view on the acquisition, with the opportunity for Priceline to build Kayak into a strategic traffic hedge to Google(GOOG) for Booking.com globally," wrote Post.

Priceline also is perfectly positioned for the mobile boom, offering investors another way to tap into the explosion in gadgets such as Apple's(AAPL) iPad and iPhone and Google Android devices.

The company's shares have risen 34.6% over the last 12 months.

TheStreet's Ratings rates Priceline a buy.

--Written by James Rogers in New York.

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