Booking Holdings (NASDAQ: BKNG) is an American travel technology company based out of Norwalk, Connecticut. The company has multiple brands under the holdings company, including Priceline.com, Agoda, KAYAK, and Opentable.
Booking.com and other travel websites have witnessed significant demand recovery, as travelers look to take advantage of the global opening since COVID. The first quarter of 2022 saw an estimated 117 million travelers compared to 41 million travelers during the same quarter in 2022. According to UNWTO, total global international arrivals in 2022 will reach 50-90% of 2019 levels where they hit close to 1.4 billion.
Booking Holding's total booking amount for the first quarter was $27 billion, and quarterly numbers will only increase as we move forward in 2022. In April, room nights increased by 10%, and total gross bookings were up 30%. Room nights were up over 100% for the first quarter y-o-y and hit a total of 198 million rooms booked.
Booking.com’s revenue increased to $2.7 billion, an increase of 136% y-o-y. The net loss for the first quarter was $700 million on a GAAP basis, including a write-down of $980 million for equity securities. On a non-GAAP basis, the first quarter witnessed a profit of $161 million versus a loss of $215 million in the prior quarter. Non-GAAP net income $3.90 per share. The company is estimated to produce around $100-105 in EPS in 2022, and this would put the forward P/E at 17-18x.
Booking.com’s industry status and travel market going forward
Global travelers are expected to spend a record amount in 2022 as travelers feel a sense of urgency to make up for the lost time due to COVID. Many are expected to spend record amounts on the back of savings from COVID, which bodes well for the tourism industry in general.
European travel growth increased by 30%; meanwhile, U.S. and Asia also recovered to witness growth in the high teens.
Furthermore, the latest travel trends include going off to places like Europe and spending on sustainable tourism. These trends should increase spending and, in return, increase the revenue flow for travel-related companies.
Due to the restrictions by the Chinese government, tourism out of China is expected to remain weak, and Chinese tourism being one of the largest sources of growth, will affect the overall growth for the year. Still, major developed countries such as Canada, Germany, the UK and the United States should see their citizens traveling more often, and 70% of those travelers in North America surveyed said they would spend more.
The global travel market is expected to grow by an average of 12-13% over the next eight years, reaching a total projected market size of $2 trillion-plus by 2030. Booking.com has a 67% market share in the European OTA market.
Risks to the travel industry
COVID has primarily become a second thought, and it increasingly looks like it will become just another version of the flu. But should a new variant affecting travel re-emerge, borders could shut down again, and the travel industry could suffer. But such a scenario is improbable, and shutdowns are increasingly less popular. The other risk is geopolitical events that could reduce travel-related activities. Altogether, there is little expectation that the outlook will worsen anytime soon.
Other issues such as inflation and increasing fuel costs could also weigh down on revenue as travelers pull back their spending. Additionally, any recession that is likely to occur could also affect spending.
What should you consider before investing in Booking Holdings?
A number of major institutional investors continue to invest in Booking Holdings, which is a positive for the stock. Booking Holdings should also benefit as the travel world opens up again. Valuations should remain within reason, and the fair value of the stock on a present value basis is around $2400-$2500, representing a 38% upside from the current levels. The company has a strong balance sheet with cash investments totaling $12.8 billion and continues to reduce debt at a significant pace. Despite recent events, the outlook for online travel agencies remains relatively safe. Therefore, investors could consider Booking Holdings if they are looking for an industry with steady cash flow and a company that is well situated within the travel industry.
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