In recent years, Booking Holdings (NASDAQ: BKNG) has established itself as the world’s largest online travel agency, offering a wide range of services from lodging to airline tickets to car rentals. As the company prepares to announce its fiscal third-quarter results, investors and traders are eagerly anticipating the financial performance and stock trajectory of BKNG.
Strong Recovery from the Pandemic
The pandemic presented significant challenges to Booking Holdings, but the company has demonstrated a strong recovery. In Q2 2023, the company’s operating income reached $1.67 billion, surpassing pre-pandemic levels and showing improvement compared to Q2 2022. This recovery is reflected in the company’s stock performance, with BKNG experiencing a 36% increase year-to-date.
In Q1 2023, Booking Holdings’ Board of Directors authorized a share repurchase program of approximately $24 billion. This program not only reflects management’s confidence in the company’s future but also indicates the potential for an increase in earnings per share (EPS) in the coming quarters. The management remains committed to completing the share repurchases within four years, which further enhances the growth prospects of BKNG.
Expectations for Q3 2023
Booking Holdings anticipates that its room night growth in Q3 2023 will be up in the low double-digits year-over-year. The company also expects revenue as a percentage of gross bookings to be around 19%, slightly higher than the previous year. Additionally, fixed expenses in Q3 are projected to increase by about 30% compared to the prior year. Despite these expenses, Booking Holdings expects its adjusted EBITDA margin for the full year 2023 to expand by a couple of percentage points versus 2022.
Stock Performance Comparison
When examining BKNG’s stock performance over the past three years, it is evident that the company has faced volatility. In 2021, the stock had an 8% return, followed by a -16% return in 2022. However, in 2023 (year-to-date), the stock has shown an impressive 36% return. In comparison, the S&P 500 index had returns of 27% in 2021, -19% in 2022, and 7% in 2023 (year-to-date). Despite some fluctuations, BKNG has outperformed the S&P 500 in 2023.
It is worth noting that consistently beating the S&P 500 has proven challenging for individual stocks in recent years, including heavyweights in the Consumer Discretionary sector and megacap stars. However, the Trefis High-Quality (HQ) Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500 each year. This suggests that a diversified portfolio approach may offer better returns and risk management than individual stock investing.
Analyst Forecast and Valuation
Based on Trefis analysis, Booking Holdings’ valuation is estimated to be $3163 per share, which is 15% higher than the current market price. This forecast takes into account an earnings per share estimate of $138.22 and a price-to-earnings (P/E) multiple of 22.9x in fiscal 2023.
Conclusion
As Booking Holdings prepares to announce its Q3 results, investor anticipation is high. The strong recovery from the pandemic, share repurchase program, and positive revenue and earnings expectations for Q3 are all factors that could influence the stock’s performance. While fluctuations in stock performance are expected, long-term investors may find value in BKNG’s solid fundamentals, growth potential, and position as a market leader in the online travel industry.
Sources: Booking Holdings, Nasdaq, Trefis High Quality (HQ) Portfolio
