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 third-quarter results on Thursday, November 2. We expect the company’s stock to likely trade higher with revenues and earnings beating market expectations marginally. Booking Holdings has fully recovered from the difficult period caused by the pandemic. Its operating income of $1.67 billion in Q2 2023 was well above the pre-pandemic values ($1.25 billion in 2019), and it also improved compared to Q2 2022 ($1 billion). 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 this year. Going forward, BKNG expects Q3 2023 room night growth will be up low double-digits y-o-y, assuming some moderation in growth from July due in part to harder prior-year comparables in August and September. The company expects Q3 revenue as a percentage of gross bookings to be around 19%, slightly above last year due to a more positive impact from timing in the expanded booking window in the first half of this year, and from increased revenue from payments. In addition, BKNG’s fixed expenses in Q3 will grow about 30% y-o-y due to higher personnel and related expenses, indirect taxes, and IT expenses. For the full-year 2023, the company expects its adjusted EBITDA margin to expand by a couple of percentage points versus 2022.
BKNG stock has shown strong gains of 25% from levels of $2225 in early January 2021 to current levels, vs. an increase of about 10% for the S&P 500 over this roughly 3-year period. However, the increase in BKNG stock has been far from consistent. Returns for the stock were 8% in 2021, -16% in 2022, and 36% in 2023 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 7% in 2023 (YTD) – indicating that BKNG underperformed the S&P in 2021. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and TM, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, 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 with high oil prices and elevated interest rates, 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?
(1) Revenues expected to be marginally above the consensus estimates
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Trefis estimates Booking Holdings’ Q3 2023 revenues to be around $7 Bil, slightly above the consensus estimate level. In Q2 2023, the online travel agency’s revenues grew 27% year-over-year (y-o-y) to $5.5 billion, driven by a 15% y-o-y increase in gross bookings to $39.7 billion. Room nights booked increased 9% from the prior-year quarter, rental car days were up 24% y-o-y, and airline tickets booked jumped 53% y-o-y in Q2. Further, BKNG’s adjusted EBITDA was up 64% y-o-y to $1.8 billion in Q2. For the full-year 2023, we expect Booking Holdings revenues to grow 18% y-o-y to $20.2 billion.
(2) EPS likely to beat the consensus estimates slightly
Booking Holdings’ Q3 2023 earnings per share (EPS) is expected to come in at $65.23 as per Trefis analysis, marginally beating the consensus estimate. The company’s earnings per share came in at $34.89 in Q2 2023 compared to $21.07 in Q2 2022.
(3) Stock price estimate higher than the current market price
Going by our Booking Holdings’ Valuation, with an earnings per share estimate of around $138.22 and a P/E multiple of 22.9x in fiscal 2023, this translates into a price of $3163, which is 15% higher 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.
|S&P 500 Return||-4%||7%||84%|
|Trefis Reinforced Value Portfolio||-6%||16%||496%|
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