Priceline (Buy, $1,920 PO) Stock view: Expect solid 1Q top-line, but 2Q can be rough for guidance Priceline’s metric trends and commentary, along with 1Q booking and room night guidance, indicate that the company continues to capture strong market share growth in the category, with little impact from hotel direct booking initiatives or competitive OTA marketing spend. We expect a strong 1Q, with perhaps a little less upside than usual due to the late 4Q reporting date. Looking forward to 2Q, we have our usual caution on guidance as 2Q is the most back- end loaded quarter for bookings and revenues. However, in 2017 the Easter shift is a positive factor and will help 2Q revenues and earnings. We also expect 1Q bookings and room night growth upside to translate into higher 2Q gross profit growth, and management indicated that there is less marketing ROI pressure expected in 1H'17 than in 2H'16. Overall, we expect Priceline’s strong business trends to continue, and would use extra conservatism in guidance as a buying opportunity. Given strong execution and higher exposure to more fragmented International markets, Priceline remains our top long-term idea in Online travel. However, on a near-term basis, we think Expedia could see a bigger stock benefit from an acceleration in room night growth over the summer. Key theme/metric(s) for 1Q: Room night growth We expect Priceline to report 26% y/y room night growth (deceleration v. 31% in 4Q), ahead of the company’s outlook of 20-25% hotel room night growth. Priceline has a history of guiding 1Q conservatively, looking at Priceline’s historical 1Q results for Bookings, revenue and EPS vs guidance suggests modest upside to our bookings growth forecast of 22% and reported 1Q’17 EPS closer to $9.55 (13% upside vs. the midpoint) vs. our estimate of $9.08 and the Street’s estimate $8.75. Table 20: 1Q Bookings Growth, Revenue Growth and EPS Guidance vs. Actuals 1013 1014 1Q15 1Q16 1Q17 Guidance Actual Upside Guidance Actual Upside G