Fundamentals Beat Technicals Going Into Priceline Earnings

This morning Priceline reported numbers that came in ahead of Street expectations and as a result shares are soaring in pre-market activity, up $121 per share at the moment.

Keep in mind that the shares were up almost $55 per share at the end of regular market trading last night as well.

The company reported revenues of $2 billion and earnings of $12.83 per share for the December quarter versus Street expectations of $1.96 billion and $11.73 per share respectively.

For the current quarter, Priceline is guiding earnings to between $9 to $9.60 per share versus Street expectations of $9.83 per share.

Going onto yesterday's earnings, my two TA gurus, Ravi and Mitch were advising me against adding to our already long position going into earnings. Their take was that the charts did not look good.

However, given the fact that the stock was cheap on a historic basis and also given its relative underperformance the last year or so, I felt that fundamentally it was ripe for enhancing our returns via some slightly out of the money calls which I added despite the technicals not looking good as per my two experts (who have been more right than wrong I might add).

Going into the call, Priceline was trading at just 14.6x FTM (forward twelve months) earnings which would be the lowest multiple in the last 7 years.

In addition, mostly tepid earnings at best from rivals TripAdvisor and Expedia had been applauded by investors last week which was another factor in my favor or in the favor of fundamentals.

Usually, I would have gone with their technical analysis and nixed adding calls into the earnings and maybe even hedged going in but sometimes fundamentals do trump technicals.

Something to keep in mind with your own portfolio.

(Long pcln, calls)

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