After a 45% growth year-to-date, at the current price of around $5109 per share, we believe Booking Holdings (NASDAQ: BKNG), the world’s largest online travel agency that offers services from lodging to airline tickets to car rentals – looks appropriately priced. BKNG stock has increased from around $3547 to $5109 YTD, outperforming the broader indices, with the S&P growing about 25% over the same period. In comparison, BKNG’s peer Expedia (NASDAQ: EXPE) stock grew 22% year-to-date to $184. Booking Holdings has fully recovered from the difficult period caused by the pandemic. Its operating income of $3.2 billion in Q3 2024 was well above the pre-pandemic values ($2.4 billion in Q3 2019), and it also improved compared to Q3 2023 ($3.1 billion). Booking saw better-than-expected numbers across every operational metric, as well as revenues and profitability in Q3. The company’s results were driven by a larger booking window, resiliency in Europe, stronger growth in Asia, and less of a negative impact from the war in the Middle East. However, the company faces challenges in the U.S. market (which accounts for 10% of the company’s business). Consumers have optimism due to the low unemployment rate and the Fed rate cuts, but there are concerns due to layoffs at major companies. Booking is still in the early stages of integrating AI technology, and the financial impact of these initiatives remains uncertain.
The increase in BKNG stock over the last 3-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 8% in 2021, -16% in 2022, and 76% in 2023. In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, is considerably less volatile. And it 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 around rate cuts and multiple wars, 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?
In Q3 2024, the online travel agency’s revenues grew 9% year-over-year (y-o-y) to $8 billion, driven by a 9% y-o-y increase in gross bookings to $43.4 billion. Room nights booked increased 8% from the prior-year quarter, rental car days were up 16% y-o-y, and airline tickets booked jumped 39% y-o-y in Q3. Further, BKNG’s adjusted EBITDA was up 12% y-o-y to $3.7 billion. Also, its earnings per share came in at $83.89, up 16% y-o-y. It should be noted that entirety of the growth in Booking’s per-share earnings in Q3 came from stock buybacks, which reduced the share count by about 6%.
We forecast Booking Holdings’ revenues to be $23.5 billion for the fiscal year 2024, up 10% y-o-y. Looking at the bottom line, we now forecast EPS at $183.29. Given the changes to our revenues and earnings forecast, we have revised our Booking Holdings’ Valuation to about $5109 per share, based on $183.29 expected EPS and a 27.9x P/E multiple for the fiscal year 2024 – in line with the current market price. In Q1 2023, the Board of Directors authorized a share repurchase program of about $24 billion which shows that there is the potential to increase EPS in the coming quarters. The management mentioned that it remains on track to complete the share repurchases within four years from when the program started at the beginning of 2023.
It is also helpful to see how its peers stack up. Check out how Booking Holdings’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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