After A Strong Start To The Year, What We Expect From Booking Holdings In 2018

Booking Holdings (NASDAQ: BKNG) reported strong Q1 earnings recently to start the year on a positive  note.  In terms of its quarterly performance, the company performed well, as expected. The company has continued to prioritize increasing direct traffic and customer loyalty. In order to do this, it has a wide selection of offerings, competitive prices and availability, an easy-to-use user interface and customer service. The company’s revenues grew by 21% to $2.92 billion for the first quarter. Its gross bookings grew by 21% and worldwide room nights by 13%. We have a price estimate of $2,485 for Booking Holdings’ stock which is 20% above its current price. With travel bookings shifting from offline to online, the company’s leading position in terms of global gross bookings, as well as its focus on growing its properties globally and improving its technological capabilities, should help it continue its strong growth in the near term.

Booking Holdings generated $2.9 billion in revenues for Q1, and we expect its revenues to be around $14.85 billion in 2018. We have created an interactive dashboard which shows our forecasts for the company’s revenues. You can modify the different revenue drivers to see how changes impact the company’s expected revenues.

Brand Marketing Is The Key To Increasing Website Traffic 

The company strives to implement various measurement tools and technologies to further its expansion in the untapped markets and various. geographies. Till the end of March, Booking.com had 28.2 million listed listings on its platform. This includes 5.2 million listings (+28% y-o-y) in the alternative accommodation segment, which the company shall focus on further expanding in the near term. The company wishes to bring in more direct booking customers on to its platform and hence it should be focusing more on TV ads which we believe will not only aid in attracting more users to the Booking.com platform, but will also help in building awareness about its vacation rentals offerings, which it is focusing on in a big way to drive future growth.

The growth in Agency gross booking by 13% in Q1 drove the Agency revenue by over 18%. With a take rate of around 14.2%, which is similar to the figure for the past few years, we estimate Agency revenue to grow by 20%  in the year ahead. The Merchant gross bookings grew by 74% in the previous quarter due to growth in gross bookings from the reservation services at Booking.com and agoda.com. A take rate of 17% is likely to drive the Merchant revenue by 7% in 2018. Advertising and Other revenue grew by 50% in Q1. These revenues are expected to increase by 15% annually in 2018, primarily due to advertising on Kayak and OpenTable.