What Happening With Booking Holdings’ Stock?

[Updated: 09/27/21] BKNG Stock Update

Booking Holdings (NASDAQ: BKNG) recently released its Q2 report, wherein revenues came in 8% ahead of our estimates but adjusted earnings per share (EPS) were worse than the expectations. In Q2, the company’s revenues nearly doubled sequentially from the first quarter to $2.16 billion, largely driven by a 2x growth in gross travel bookings (that include cost, taxes, and fees of all services booked). However, BKNG’s total revenues in the quarter were still down 44% from 2019 levels. Q2 2021 has shown rising travel demand as it saw the company’s room nights increase 59% compared to the first quarter of 2021 – thanks to the stronger results in Europe and in the U.S. This metric was down 26% compared to Q2 2019, but that was a lot better than the 54% drop it saw in the previous quarter when compared to Q1 2019. In addition, the travel company posted an adjusted loss of $2.55 per share as it spent aggressively on marketing in an attempt to gain market share.

Booking Holdings declined to give guidance due to the volatility in the travel market, largely due to the spread of the delta variant. However, it forecasts that Q3 will be stronger than Q2. A full recovery may still be several quarters away for the company, but grabbing market share looks like a good strategy during this crisis. We have updated our model following the fiscal Q2 release. We now forecast Booking Holdings’ Revenues to be $9.3 billion for fiscal 2021, up 37% y-o-y, slightly higher than our prior forecast. We now expect adjusted EPS to come in at $33.33, up 3x y-o-y, compared to our prior estimate of $29.00. Given the changes, we have revised our Booking Holdings’ Valuation at $2324 per share, based on $230.43 expected revenue per share RPS and a 10.1x P/S multiple for fiscal 2021 – 6% lower than the current market price. The travel stock has fully recovered from its pandemic sell-off and is now about 17% higher than the levels of $2073, at the beginning of 2020.

[Updated: 08/03/21] BKNG Q2 Pre-Earnings

Booking Holdings (NASDAQ: BKNG), the world’s largest online travel agency that offers services from lodging to airline tickets to car rentals, is scheduled to announce its fiscal second-quarter results on Wednesday, August 4. We expect the company’s stock to likely trade higher as its revenues and earnings could beat consensus estimates. While the travel business remained weak in the first quarter, due to various lockdown restrictions in many parts of the world – the U.S. recorded positive growth results as the Q1 2021 room night number was higher than the pre-pandemic level. This means that mass vaccinations are helping the travel industry to recover and the company has noticed encouraging trends in countries where vaccine distribution is being organized successfully (the UK, U.S., and Israel) except Asia where vaccine distribution is rather slow. In fact, the company mentioned that bookings in Israel, which has vaccinated more than half of its people, are now up more than double-digits from 2019 levels. We believe that declining Covid cases and an increased vaccination rate during the June end quarter should help BKNG to post sequentially improved results.

(1) Revenues expected to be ahead of the consensus estimates

Trefis estimates Booking Holdings’ Q2 2021 revenues to be around $2 Bil, 8% higher than the consensus estimate. The travel sector was beaten down in 2020 as the onset of the pandemic led people to stop traveling, forcing travel companies such as BKNG to close global offices and eliminate a quarter of their workforce. As evident, Booking Holdings’ revenues declined a major 55% year-over-year (y-o-y) in 2020. In addition, profits were also down a whopping 99%. The business continued to plunge in the first quarter, where revenue was down 8% sequentially from $1.24 billion in Q4 2020 to $1.14 billion in Q1 2021. In fact, BKNG’s revenues declined 50% from year-ago quarter levels in Q1. However, we expect the company’s sales to pick up in second-half of 2021.

For the full-year 2021, we expect Booking Holdings revenues to grow 37% y-o-y.

(2) EPS likely to marginally beat consensus estimates

Booking Holdings’ Q2 2021 earnings per share (EPS) is expected to come in at a loss of $1.90 as per Trefis analysis, marginally higher than the consensus estimate of -$2.10. In Q1 2021, the company was able to limit its net loss to $1.34 per share (which was better than analysts’ consensus expectation for a loss of $7.48 per share), as it scaled back sharply on marketing spending. It should be noted that roughly half of BKNG’s expenses come from sales and marketing. The company has a high variable cost, which makes it easier for it to conserve cash in difficult economic times. As it is, the company reported $16.4 billion in cash and investments in Q1 as compared to a heavy debt load of close to $13 billion. That said, the online travel booking site stock could still weather the Covid storm based on its strong liquidity position.

(3) Stock price estimate higher than the current market price

Going by our Booking Holding’s Valuation, with a revenue per share (RPS) estimate of around $230.43 and P/S multiple of just around 10.6x in fiscal 2021, this translates into a price of $2452, which is 13% higher than the current market price of around $2171.

For further comparison among peer groups, it is helpful to see how they stack up. BKNG Stock Comparison With Peers summarizes how Booking Holdings compares against peers on metrics that matter.

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