The online travel market is "huge, growing, and not saturated to any degree at all," said senior analyst at Piper Jaffray Mike Olson. "The bottom line is that Priceline.com is doing whatever they can to take advantage of that."
Olsen said that it would be "shortsighted" for investors sell the stock for its increased spending and potentially lower margins. The company is forecasting lower margins in the first quarter, according to the Tuesday earnings release from the company, although no longer-term guidance was given.
Currently, Olsen's firm has an "overweight" rating on Priceline, with a price target of $800. This view is based on an expected growth in earnings north of 20 percent over the next couple years. "If you look out to 2015, assuming they grow earnings by 15 to 20 percent over the next three years, you could easily see earnings per share getting to $50," he said.
Olsen points out that the company has never given forward guidance for more than one quarter, adding that Expedia's strong report earlier in the quarter "shows that the market can support multiple major players," he said.
Olsen sees two major growth trends in the market over the next few years: international travel and an increase in online travel advertising. Olsen said that this was his perspective on the $1.8 billion purchase of Kayak.com by Priceline.
"Priceline is looking to diversify to some extent outside of its traditional online travel bookings model and get some exposure to online travel ad spend, and Kayak is the biggest player," he said.
Earlier on CNBC's "Squawk on the Street," Jim Cramer said that "this was quite an impressive quarter" for Priceline and sees the company as an emerging market play. He thinks downgrades for other companies in the sector, including Starwood Hotels and Marriott, were "premature," based on strength coming from Priceline's report.
"This is a very hot industry," Cramer said. "People are traveling, nothing slowed down among European travelers. They still take their vacations, but they are just cheaper."
After the bell Tuesday, Priceline reported earnings that topped analyst estimates, with net income rising to $288.7 million ($5.63 per share) compared with $225.7 million ($4.41 per share) a year earlier.
Excluding items, earnings climbed to $6.77 per share from $5.37 a share in the year-earlier period.
Revenue improved 20 percent to $1.19 billion from $991 million a year ago.
Analysts had expected Priceline to report earnings excluding items of $6.54 a share on $1.19 billion in revenue, according to a consensus estimate from Thomson Reuters.
The company expects travel bookings and gross profit to each increase 30 percent to 37 percent in the first quarter of 2013. However, it warned that because of troubles in the euro zone, among other global concerns, "variability around its guidance is elevated."
"The group's brands are off to a good start in 2013, with greater supply and geographic reach," said CEO Jeffrey Boyd in a press release. "While global economic conditions remain a concern, we are excited about our long-term outlook."
—Reuters contributed to this report.
— By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from "Squawk on the Street" @ToscanoPaul