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Multiple sectors such as airline, travel, energy, hospitality, and retail have been negatively impacted due to COVID-19. As the world aims to return towards normalcy driven by the accelerated rollout of vaccinations it makes sense to look at recovery stocks that can make a comeback. Here, we analyze one online travel company Booking Holdings (NASDAQ: BKNG) to see if it’s a good bet today.
Booking Holdings - An overview
Booking Holdings provides travel and restaurant online reservation services globally. It operates Booking.com which offers online accommodation reservations while Rentalcars.com provides online car rental services. Further, Priceline offers online travel reservation services in the hotel, rental car, and airline reservation verticals, in addition to vacation packages and cruises.
Booking Holdings owns Agoda which is an online platform for hotel, flight, and transportation reservations as well as KAYAK which is an online price comparison service where you can search and compare travel itineraries and prices. For online restaurant reservations, it has OpenTable. The company also offers travel-related insurance products and restaurant management services.
It is one of the leading companies in online travel and related services. The company operates in more than 220 countries and territories through its six consumer-facing brands.
BKNG stock is valued at a market cap of $96 billion and has been one of the top performers in the last decade. Since May 2020, Booking stock has returned 371% compared to the S&P 500 (AMEX: SPY) returns of 284%.
Booking Holdings recent Q1 results
In the first quarter of 2021, Booking Holdings reported gross travel bookings of $11.9 billion which was down 4% year over year. The gross travel bookings include the total dollar value of all travel services booked by customers on its platforms. While room nights booked were down 20% year over year, its total sales were down by a significant 50% at $1.1 billion in the March quarter.
Booking Holdings reported a net loss of $55 million, compared with its net loss of $699 million in the prior-year period. The company’s net loss was narrower in Q1 due to a net gain of $32 million on marketable equity securities. Comparatively, it reported a net loss of $307 million on marketable securities in Q1 of 2020. Further, Booking’s net loss in the last year was higher due to a goodwill impairment charge of $489 million related to the OpenTable and KAYAK.
On an adjusted basis, the company reported a net loss of $5.26 per share or $215 million in Q1 of 2021 compared with a net income of $3.77 per share or $156 million in Q1 of 2020.
"We saw encouraging signs of improving booking trends in the first quarter that continued into April with notable strength in the U.S.," said Glenn Fogel, Chief Executive Officer of Booking Holdings. "While we expect there will be continued volatility in the recovery of global travel demand, our teams across Booking Holdings will continue their hard work to strengthen the positioning of our company and execute against our key strategic priorities."
Will BKNG stock continue to move higher?
There are multiple signs that indicate massive pent-up demand for travel and leisure activities in a post-COVID-19 world. This has also resulted in a stellar comeback among cruise-line and airline stocks in the last year as analysts and investors anticipate the reopening of global economies to drive demand.
Right now, BKNG stock is trading just 6% below its record high and the aggressive vaccine rollout should impact top-line growth for the company going forward. However, Booking also derives a significant portion of its revenue from international markets where the vaccinations are delivered at a far more cautious pace.
Analysts tracking BKNG stock expect the company to increase sales by 37% to $9.31 billion in 2021 and by 56% to $14.5 billion in 2022. In fiscal 2019, Booking Holdings reported sales of $15 billion. Further, Wall Street expects Booking Holdings to increase its earnings per share from $4.71 in 2020 to $92.5 in 2022.
The 12-month average trading price for BKNG stock is $2,535 which is 8% above its current price.
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