Booking Holdings: Robust Growth Amidst Market Challenges

Booking Holdings (NASDAQ: BKNG), the largest online travel agency in the world, has seen a remarkable 45% increase in its stock price this year, now sitting at approximately $5109 per share. The stock has surged from $3547 at the beginning of the year, outshining the S&P 500, which grew about 25% in the same timeframe. For context, competitor Expedia (NASDAQ: EXPE) reported a 22% rise year-to-date, reaching $184. After navigating the hardships of the pandemic, Booking Holdings has rebounded significantly. In Q3 2024, the company reported an operating income of $3.2 billion, surpassing the pre-pandemic figure of $2.4 billion from Q3 2019, and showing an improvement from $3.1 billion in Q3 2023. Strong operational metrics highlighted the quarter, with increases in revenues and profitability, spurred by a broader booking window, resilience in Europe, growth in Asia, and a lesser impact from conflicts in the Middle East. Nonetheless, challenges persist in the U.S. market, which makes up 10% of the business. While consumer sentiment is buoyed by low unemployment and recent Fed rate cuts, concerns over layoffs at major firms remain. Moreover, Booking is still in the early stages of implementing AI technology, making the financial implications of these efforts uncertain.

Three Years of Volatile Returns

The stock’s performance over the past three years has not been stable. Booking Holdings had an 8% return in 2021, a drop of 16% in 2022, and a staggering 76% increase in 2023. Comparatively, the Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, exhibited much less volatility and outperformed the S&P 500 in each year analyzed.

Will Past Performance Repeat Itself?

This raises the question: could Booking Holdings face a repeat of 2021, potentially underperforming the S&P 500 over the next 12 months, or will it continue its upward trajectory? In Q3 2024, Booking’s revenues saw a 9% year-over-year increase, totaling $8 billion. Gross bookings also rose by 9%, reaching $43.4 billion. Room nights booked increased by 8%, rental car days were up 16%, and airline tickets booked surged by 39%. Adjusted EBITDA rose 12% year-over-year to $3.7 billion, while earnings per share climbed to $83.89, a 16% increase from the previous year. Significantly, this growth in per-share earnings was entirely due to stock buybacks, which lowered the share count by about 6%.

Financial Forecasts and Strategies

Looking ahead, we project Booking Holdings’ revenues to reach $23.5 billion for fiscal year 2024, marking a 10% increase year-over-year. EPS is expected to be $183.29. Based on these projections, our valuation for Booking shares stands at approximately $5109, aligned with the current market price and based on a 27.9x price-to-earnings multiple for 2024. Earlier this year, the Board of Directors authorized a $24 billion share repurchase program, signaling potential for further EPS growth in upcoming quarters. Management has indicated that they are on schedule to complete these repurchases within four years of the program’s initiation in early 2023.

Comparing Peers for Better Insight

It is also informative to consider how Booking Holdings compares to its peers. For further insights on competitors, check out our Peer Comparisons section.

[1] Returns as of 11/26/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.