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Stock Spotlight

Book it: Travel agency can grow

 
Recent Price
$1,698
 
Dividend
$0.00
 
Yield
0.0%
 
P/E Ratio
19
 
Shares (millions)
48
 
Long-Term Debt as % of Capital
47%
 
52-Week Price Range
$2,228.99 - $1,606.27

If you travel, there’s a good chance Booking Holdings ($1,698; BKNG) helped you with your reservations. What is now the world’s largest online travel company launched in 1997 under the priceline.com brand. Since then, it has amassed a portfolio of popular travel- and entertainment-related sites such as KAYAK, OpenTable, and European properties agoda.com, Booking.com, and Rentalcars.com.

Last year, consumers booked more than $81 billion in reservations at Booking Holdings properties, up 19% from the previous year. Those bookings include 673 million hotel rooms, up 21%. While such business volume is impressive on its face, it represents less than 10% of the global market for overall travel spending, according to analysts at J.P. Morgan. Booking Holdings has plenty of room to gain share in coming years, which gives us some confidence in analysts’ expectations for long-term profit growth of 16% a year. Booking Holdings earns a Buy and Long-Term Buy rating.

International powerhouse

The company has a particularly strong presence in Europe. In 2017, Booking Holdings collected 75% of its revenue from The Netherlands (mostly through Booking.com), 13% from the U.S., and 12% from the rest of the world.

In the 12 months ended September, sales grew 15%, per-share profits 17%, and operating cash flow 18%. Improvements in profitability have fattened the bottom line, with operating profit margins reaching 39.8% in the 12 months ended September, up from 38.4% a year earlier and 37.8% three years earlier, reflecting shrewd management of marketing costs. The consensus projects continued growth and margin expansion, with analyst targets calling for sales to rise 11% and per-share profits 14% in 2019.

Traveling forward

With occupancy rates at or near record highs in many markets, some question whether Booking Holdings can keep putting up the growth. Here are three reasons for optimism:

1) Space available: Like most online travel marketers, Booking Holdings makes more money when it buys up blocks of hotel rooms at preset prices, rather than simply receiving a commission for each sale. Despite robust occupancy, these merchant bookings continue to grow. In the September quarter, Booking Holdings reported a 13% increase in room nights. For the December quarter, the company projects 9% to 12% growth in bookings.

2) Financial flexibility: To service an increasingly multinational travel market, Booking Holdings has expanded its payment and reimbursement options, making its sites more appealing to both travelers and property owners who may not be able to use the same financial platform to conduct their transactions.

3) Alternatives: Booking Holdings is expanding aggressively into accommodations other than hotel rooms, particularly vacation-rental homes. The company doesn’t break out how much of its revenue comes from alternative accommodations, but says the market is key to future growth.

You can obtain an annual report for Booking Holdings Inc. at 800 Connecticut Ave., Norwalk, CT 06854, (203) 299-8000, www.bookingholdings.com.

 

 
Quarter Per-Share Earnings* Sales Change Quarterly Price Range P/E Ratio Range
Sep '18 $37.78 vs. $35.22 9% $2,131.90 - $1,815.50 25 - 21
Jun '18 20.67 vs. 15.14 17% 2,201.84 - 1,980.00 28 - 25
Mar '18 12.00 vs. 9.88 21% 2,228.99 - 1,714.07 29 - 22
Dec '17 16.86 vs. 14.21 19% 1,961.45 - 1,630.56 26 - 22

 
Year (Dec.) Sales (Bil.) Per-Share Earnings* Per-Share Dividend 52-Week Price Range P/E Ratio Range
2017 $12.68 77.03 $0.00 $2,067.99 - $1,459.49 27 - 19
2016 10.74 65.63 0.00 1,600.93 - 954.02 24 - 15
2015 9.22 58.33 0.00 1,476.52 - 990.69 25 - 17
2014 8.44 53.31 0.00 1,378.96 - 1,017.28 26 - 19

 
Quadrix Scores
Overall Momentum Value Quality Financial Strength Earnings Estimates Performance
73 68 50 97 80 35 35

* Earnings exclude special items.
NA Not Available.
† Quadrix® scores are percentile ranks, with 100 the best.
e Dividend and yield estimated.

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Stock Spotlight

Book it: Travel agency can grow

Wednesday, January 16, 2019

If you travel, there's a good chance Booking Holdings ($1,698; BKNG) helped you with your reservations. What is now the world's largest online travel company launched in 1997 under the...

Read More from Stock Spotlight

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