Will Booking Holdings Stock Trade Lower Post Q2?

-3.85%
Downside
3822
Market
3675
Trefis
BKNG: Booking Holdings logo
BKNG
Booking Holdings

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 second-quarter results on Thursday, August 3. We expect the company’s stock to likely trade lower with revenues and earnings missing market expectations. Booking Holdings has fully recovered from the difficult period caused by the pandemic in terms of revenues. However, its operating income of $450 million in Q1 2023 is still below pre-pandemic values ($556 million in 2019), although it improved compared to Q1 2022. In Q1 2023, the Board of Directors authorized a share repurchase program of about $20 billion which shows that there is the potential to increase EPS in the coming quarters. Still, uncertain macro conditions pose a risk for the business in 2023. Going forward, BKNG expects Q2 2023 room night growth to be up mid-single-digits year-over-year (y-o-y). In addition, BKNG’s fixed expenses in Q2 will grow about 25% y-o-y due to higher personnel and related expenses, indirect taxes, and IT expense. For the full-year 2023, the company expects its adjusted EBITDA margin to expand by a couple of percentage points versus 2022.

Our forecast indicates that Booking Holdings’ valuation is $2722 per share, which is 10% lower than the current market price. Look at our interactive dashboard analysis on Booking Holdings Earnings Preview: What To Expect in Q2? for more details.

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

Trefis estimates Booking Holdings’ Q2 2023 revenues to be around $5.1 Bil, slightly down from the consensus estimate level. In Q1, the online travel agency’s revenues grew 40%y-o-y to $3.8 billion, driven by a 44% y-o-y increase in gross bookings to $39 billion. Room nights booked increased 38% from the prior-year quarter, rental car days were up 23% y-o-y, and airline tickets booked jumped 73% y-o-y in Q1. Further, BKNG’s adjusted EBITDA was up 89% y-o-y to $586 million but came in below the consensus estimate of $627 million. For the full-year 2023, we expect Booking Holdings revenues to grow 21% y-o-y to $20.6 billion.

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(2) EPS likely to miss the consensus estimates slightly 

Booking Holdings’ Q2 2023 earnings per share (EPS) is expected to come in at $28.23 as per Trefis analysis, marginally missing the consensus estimate of $28.65. Its Q1 earnings per share came in at $7.00 compared to a loss of $17.10 in Q1 2022. Last year in 2022, Q1 was severely impacted by the Omicron Covid-19 variant and Q2 2022 saw a strong rebound from Omicron-impacted Q1 2022.

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

Going by our Booking Holdings’ Valuation, with an earnings per share estimate of around $97.57 and a P/E multiple of 19.7x in fiscal 2023, this translates into a price of $2722, which is 10% 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.

What if you’re looking for a portfolio that aims for long-term growth? Here’s a value portfolio that’s done much better than the market since 2016.

 Returns Jul 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 BKNG Return 12% 49% 105%
 S&P 500 Return 3% 19% 105%
 Trefis Multi-Strategy Portfolio 7% 28% 310%

[1] Month-to-date and year-to-date as of 7/31/2023
[2] Cumulative total returns since the end of 2016

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