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By Dan Wasiolek | 05-13-2015 03:00 PM

This Online-Travel Stock Is in Buying Range

Narrow-moat Priceline should increase its market share substantially in the coming years, and shares trade at a discount.

Dan Wasiolek: Global online travel agency Priceline (PCLN) may be best known for its commercials starring William Shatner, but its strong competitive position and attractive valuation make it a stock that investors should have on their radar.

Priceline's expanding network of global travel services continues to generate bookings growth well above industry rates.

The company's Booking.com hosts 640,000 properties, which is more than twice the next-largest competitor, and which grew more than 40%, year over year, in the most recent quarter. This network supply supports currency-neutral bookings growth of around 30%, which is around three times the industry growth rate, despite its international bookings, which are 88% of total bookings, being two times the size of the nearest competitor in the industry.

Additionally, Priceline's global sold room nights are more than twice those of the number-two player in the industry.

Although the industry remains competitive and expenses are increasing, we forecast operating margins expanding to the mid-40% range in 10 years from the 36.4% reported in 2014, as the company grows its share of the trillion-dollar-plus travel market to high single digits in 2019 from mid-single digits, currently.

Priceline earns a narrow economic moat and is currently trading at a significant discount to our fair value estimate.

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