What To Expect From Booking Holdings’ Q4 After Stock Up A Strong 84% Since 2023?

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 fourth-quarter results on Thursday, February 22. We expect the company’s stock to likely trade lower with revenues and earnings missing market expectations marginally. Booking Holdings has fully recovered from the difficult period caused by the pandemic. The company’s stock is up 84% since the start of 2023. Travel and experiences drove U.S. consumer spending in 2023, increasing Booking Holdings’ stock price. There is optimism among consumers due to the low unemployment rate and the anticipated fed rate cuts, but there are concerns due to layoffs at major companies.

Going forward, BKNG expects Q4 2023 room night growth will be up 9% y-o-y. The company expects Q4 revenue as a percentage of gross bookings to be around 15%, slightly above last year due to a more positive impact from timing in the expanded booking window in 2023. For the full year 2023, the company expects full-year gross bookings growth of over 20% y-o-y. It also expects full-year marketing merchandising, as a percentage of gross bookings to be slightly below FY 2022 and fixed expenses to grow around 25% y-o-y.

BKNG stock has seen extremely strong gains of 65% from levels of $2225 in early January 2021 to current levels, vs. an increase of about 35% for the S&P 500 over this roughly 3-year period. However, the increase in BKNG stock has been far from consistent. Returns for the stock were 8% in 2021, -16% in 2022, and 76% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that BKNG underperformed the S&P in 2021. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and TM, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could BKNG face a similar situation as it did in 2021 and underperform the S&P over the next 12 months – or will it see a strong jump?

Our forecast indicates that Booking Holdings’ valuation is $3163 per share, which is 15% lower than the current market price. Look at our interactive dashboard analysis on Booking Holdings Earnings Preview: What To Expect in Q4? for more details.

(1) Revenues expected to be marginally below the consensus estimates

Trefis estimates Booking Holdings’ Q4 2023 revenues to be around $4.5 Bil, slightly below the consensus estimate level. In Q3 2023, the online travel agency’s revenues grew 21% year-over-year (y-o-y) to $7.3 billion, driven by a 24% y-o-y increase in gross bookings to $39.8 billion. Gross travel bookings refer to the total dollar value, generally inclusive of taxes and fees, of all travel services booked by the customers, net of cancellations. Room nights booked increased 15% from the prior-year quarter, rental car days were up 20% y-o-y, and airline tickets booked jumped 57% y-o-y in Q3. Further, BKNG’s adjusted EBITDA was up 24% y-o-y to $3.3 billion in Q3. For the full-year 2023, we expect Booking Holdings revenues to grow 18% y-o-y to $20.2 billion.

(2) EPS likely to miss the consensus estimates  

Booking Holdings’ Q4 2023 earnings per share (EPS) is expected to come in at $27.89 as per Trefis analysis, missing the consensus estimate. The company’s Q3 non-GAAP earnings per share grew 36% y-o-y to $72.32.

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

Going by our Booking Holdings’ Valuation, with an earnings per share estimate of around $138.22 and a P/E multiple of 22.9x in fiscal 2023, this translates into a price of $3163, which is 15% lower than the current market price.

It is helpful to see how its peers stack up. BKNG Peers shows how Booking Holdings stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 2/21/2024
[2] Cumulative total returns since the end of 2016