Priceline.com (Nasdaq: PCLN) climbed US$1.16 to $6.01 in morning trading Tuesday, after Goldman Sachs upgraded the stock to market outperform from market perform, saying management has streamlined operations and positioned the company for a turnaround.
Priceline's first-quarter results, due out after the close of trading Tuesday, could mark the company's "last unprofitable quarter," wrote Goldman analyst Anthony Noto in a research note.
The results, according to Noto, "should demonstrate the worst is behind the company, and the stock should show solid appreciation."
Earlier this month, Priceline said it is "on track" to report first-quarter results at the high end of analyst forecasts for a loss of 5 to 7 cents per share before restructuring and other charges, and predicted a pro forma profit for the second quarter.
Noto said that goal is likely to be achieved. According to the analyst, Priceline "has successfully 'right-sized' its cost structure, and now better controls its destiny."
In addition, airline cost increases and economic conditions "are "most favorable for Priceline," Noto wrote.
Priceline, however, is a least a quarter behind its competitors, Travelocity (Nasdaq: TVLY) and Expedia (Nasdaq: EXPE), which both recently reported profits.
Though Priceline is still turning itself around, Noto wrote, the stock is a good value when the company is viewed as an online travel business rather than a diversified e-tailer.
"Priceline has a sustainable business in just
travel," wrote Noto. "The quarterly results should reinforce the company's
ability to achieve profitability with continued modest growth and cost
controls."
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