Betting on the Online Travel Revolution — and a New Option Recommendation

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

It was a mixed week in U.S. and global stock markets. The Dow Jones was down 0.47% while the S&P 500 ended the week 0.46% higher. Global markets continued to struggle, with the MSCI Emerging Markets Index tumbling 1.65%.

Big gainers in your Bull Market Alert portfolio included Bank of Ireland (IRE), which soared 13.42%. Your remaining options are now up 226.67%. With the stock clocking double-digit percentage gains every other week, I am recommending you hold on to these options for now.

Biotech star Celgene (CELG) also jumped up 4.36%. With the stock bottoming last week, this is a good time to buy the January $140 call options (CELG140118C00140000).

This week’s Bull Market Alert portfolio recommendation, Priceline (PCLN), is a good old-fashioned momentum play in the highly competitive world of online travel.

As you may know from the corny TV ads with William Shatner, Priceline is the online travel company that pioneered “name-your-price” travel services.

Once a dotcom darling that only recently reached the highs it did back in 1999, Priceline provides hotel reservation services across the planet at approximately 275,000 properties in 175 countries. In addition to the Priceline brand, it also operates the Booking.com and Agoda.com brands, and it just finished its acquisition of Kayak.com in May.

Quickly becoming the gorilla of the online booking world, Priceline continues to take share from traditional travel agencies as well as other online services.

On Aug. 8, Priceline reported Q2 earnings that crushed analysts’ forecasts. Revenue surged 27% year-over-year to $1.7 billion, above consensus estimates. Earnings per share jumped 24% year-over-year to $9.70, from $7.85 in the year-earlier quarter. That beat analysts’ consensus by 34 cents.

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Priceline posted gross bookings of $10.1 billion, 38% higher than the same period a year ago. International bookings drove the lion’s share of the growth, surging 44% year-over-year to $8.6 billion. Priceline also showed acceleration across most key metrics, including hotel room nights, international foreign exchange-neutral bookings and gross profit.

Looking ahead, Priceline is forecasting a strong third quarter with revenues of $15.30 to $16.30 a share on a 23% to 30% year-over-year revenue gain. No wonder analysts have upped their target price on the stock. JPMorgan’s target price on the stock is $1,130 on the stock — 18.44% above Friday’s close.

So buy Priceline (PCLN) at market today, and place your stop at $870.

If you want to play the options, I recommend the November $1,000 calls (PCLN131116C01000000).

Portfolio Update

Bank of Ireland (IRE) launched 13.42% last week, and two out of the past three weeks have been double-digit percentage gainers. The stock is up 89.85% in 2013. The stock is also starting to see record trading volume tick up, hitting the one-million-shares-per-day mark several times over the past three weeks. Fitch Ratings also affirmed two of IRE’s large mortgage loan pools with “AAAsf” ratings, calling their outlook “Stable” and citing several positive attributes such as “solid asset performance” and “a stable loans-in-arrears trend.” IRE remains a strong BUY.

WellPoint, Inc. (WLP) rose 0.62%. One out of every nine U.S.-born babies is deemed “premature,” leading to a high-risk period early in their lives requiring specialized care. WellPoint announced last week that it will be using CareNex Health Services as its neo-natal provider. The good news, besides saving the lives of many more newborns, is that WellPoint became the sole owner of CareNex in late 2012, thus helping to keep its own bottom-line healthy as well. WLP is a BUY.

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Celgene Corporation (CELG) added 4.36%. Right on cue, CELG took a textbook bounce from its 50-day moving average last week, to close the week with a terrific gain. And, also on-cue, insider and Vice President Daniel Thomas acquired 11,142 shares of CELG last week, investing a grand total of $600,000. This is a great time to add to your position. CELG is a BUY.

Gentherm (THRM) dipped 0.91% over the past five trading days. THRM’s trading price has leveled off over the past week, right at the 100-day moving average. I am keeping an eye on this position, as this is a good indication that the post-earnings report fallout is finally shaking out. THRM may be readying for a move upwards. THRM is a HOLD.

Google Inc. (GOOG) took an anticipated bounce from a key support level last week, adding 1.55% for its first week in your portfolio. I mentioned Google’s new, and wildly popular, Chromecast media-streaming device in my recommendation. This “stepping stone” leads to a larger Google aspiration — Google Internet TV. Google’s rumored venture onto your living room television screen took another step closer to reality recently. DirecTV’s NFL “Sunday Ticket” contract, a service that allows viewers unlimited access to America’s most popular sport, expires at the end of the upcoming 2014 football season. Sources are saying Google CEO Larry Page has been in talks to acquire the rights to this package. GOOG is a BUY.

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