Good morning,

Markets are called to open flat this morning. This is what's happening today:

  • China’s exports and imports rose less than estimated in April as weakness in Europe and a domestic slowdown weighed on trade, adding pressure on the government to ease policies to spur expansion;
  • The 17-nation euro area is on the verge of losing one of its members, with more than 50% of investors predicting an exit this year as Greece’s election impasse threatens to push the debt crisis to new depths, according to the Bloomberg Global Poll;
  • Global investors give Federal Reserve Chairman Ben S. Bernanke his highest approval rating since 2009 and expect him to take further action this year to accelerate a revival in the U.S. economy and financial markets;
  • 10-year Italian debt is trading at 5.597%, 10-year Spanish debt is trading at 6.078% and 10-year Portuguese debt is trading at 11.533%;
  • Brent is trading at $112.90/Barrel;
  • Today there is a Bank of England meeting and we will see if that bank will increase its bond buying. It's a case of growth vrs inflation;
  • Apple closed the session at $569.18 and Priceline closed the session at $718.95 (after hours $690.88;
  • Inc. (PCLN), the biggest U.S. online travel agency by market value, fell in late trading yesterday after forecasting second-quarter earnings that trailed analysts’ estimates.

Markets have lost half of their gains made in Q112 so far. The DAX is you 9.78% year-to-date, the CAC is down 1.3%, the FTSE 100 is flat and the S&P 500 is up 7.71%.

From the monetary fortress of the European Central Bank to the pro-European duchy of Luxembourg, policy makers are beginning to air their doubts that Greece can stay in the euro. Post-election tumult in Athens has put the once-taboo subject of an exit from the 17-country currency union on the agenda, lifting the veil on possible scenario planning afoot behind the scenes. “If Greece decides not to stay in the euro zone, we cannot force Greece,” German Finance Minister Wolfgang Schaeuble said at a conference sponsored by German broadcaster WDR in Brussels yesterday. “They will decide whether to stay in the euro zone or not.”

The euro fell for the eighth day as it dawned on investors that Greek voters’ revolt against austerity, and not the victory of Socialist Francois Hollande in France, was the more significant of the two national elections in the EU on May 6. The EURUSD is now trading at 1.2950.

Spain said it would take over Bankia SA and prepared to inject public funds into the banking group with the most Spanish real estate as part of government efforts to bolster confidence in the country’s lenders.

Spain’s bank bailout fund will convert its 4.5 billion euros ($5.8 billion) of preferred shares in Bankia’s parent company Banco Financiero y de Ahorros, or BFA, into voting shares, the Economy Ministry said in a statement yesterday. The action will give it a controlling stake of 45 percent in Bankia, the ministry said, adding the government will provide the capital that’s “strictly necessary” to clean up the lender.

Stock to watch: Priceline (Price $718.95, Citi's Price Target $850)

Priceline Reported A Beat March Quarter… — Gross Bookings ($6.71B), Revenue ($1.04B), & Non-GAAP EPS ($4.28) were all in line with or ahead of Citi/Street at ($6.40B/$6.42B), ($1.02B/$1.04B), & ($3.90/$3.95), respectively.

…But Slightly Lowered Q2 Guide – MidPt Gross Bookings Guide at $7.4B is below the Street at $7.70B. MidPt EPS Guide at $7.30 is a shade below the Street at $7.37. Seems a bit conservative….

Positive Fundamentals — Organic Gross Bookings growth decel’d 6 pts to 47%, though the comp was 9 pts tougher. Gross Profit growth also decel’d 4 pts to 47%, tho the comp was 6 pts tougher. EBITDA Margin (as a % of Gross Profit) increased 250 bps to 36.8%, leading to EBITDA growth of 58% Y/Y. One of the strongest in the sector.

Now 5 For 7 – Per our Q Preview, PCLN traded off 4 of the past 6 Q1 EPS Prints. Now it’s 5 For 7, given the 4% after-market correction. Why this sell-off? 1) Because several sell-side previews had predicted dramatic upside to estimates…; 2) Because PCLN IS up 50% YTD…; 3) Because management issued cautious commentary re: Southern European market demand & International cancellations – tho this commentary was identical to Q4; 4) Because PCLN Domestic Bookings underperformed EXPE – but EXPE had very easy comps; 5) Because fundamentals deteriorated – actually they didn’t, per the above bullet; 6) Because the results didn’t exceed PCLN guidance by the typical amount – actually they did, per Exhibit 4… Our point is that this was an Expectations Correction. One has been able to make $ buying PCLN Expectation corrections in the past. We think one can do so again here…

Tweaking Estimates; Maintaining $850 PT – ’12 EPS from $32.09 to $32.44. PT remains $850 – 20X ’13 EPS of $43. 30%+ EPS CAGR supports a premium multiple.

Reiterate Buy; One Of Our Top Large Cap Longs – Investment Thesis: 1. Only 3%- 4% Global Room Night Market Share likely ensures sustainable growth; 2. Reasonably sustainable competitive advantages in Europe; 3. Significant Asia & LatAm growth drivers with Agoda &; 4. A consistent track record of market share gains; 5. One of the best mgmt teams in the Internet sector; & 6. Even up 50% YTD, PCLN has a very reasonable valuation – 21X 2012 P/E, a discount to its 30%+ EPS CAGR.

For further information on Priceline or other stocks we follow, contact our offices on 25688688.

Good day and happy trading!

Kristian Camenzuli