Analyst Views and Growth Potential of Booking Holdings (BKNG) in the Travel Industry

Apr 12, 2024 | Investment Ideas

Booking Holdings (NASDAQ:BKNG), formerly known as Priceline.com, is a leading player in the online travel industry. It operates various well-known travel fare aggregators and travel fare metasearch engines including Booking.com, Priceline.com, Agoda.com, Kayak.com, Cheapflights, Rentalcars.com, and OpenTable.

The travel industry has experienced a significant rebound following the disruptions caused by the COVID-19 pandemic. As a market leader in the online travel services industry, Booking Holdings has been at the forefront of this resurgence, demonstrating strong financial performance and growth potential. Analysts have expressed optimism about the company’s long-term prospects, with several raising their price targets and maintaining favorable ratings on the stock. This report will examine the views of financial analysts on Booking Holdings and assess the growth potential for the company within the context of the broader travel industry’s trajectory in 2024.

    Competitors of BKNG

    BKNG’s main competitors in the travel industry include Expedia Group (NASDAQ:EXPE), Airbnb (NASDAQ:ABNB), Trip.com Group (NASDAQ:TCOM), American Express Global Business Travel, CWT, Hotel Reservation Service (HRS), and Traveloka. These companies vary in their service offerings, market share, and customer base, which are critical factors in determining their competitive edge.

    Market Share and Revenue Comparison

    In terms of revenue, BKNG is the established market leader with reported revenues of $17.1 billion in 2023. Its closest competitor, Expedia Group, reported revenues of $11.7 billion, followed by Airbnb with $8.4 billion, and Trip.com Group with $2.6 billion. This substantial revenue gap highlights BKNG’s dominance in the market, as it continues to leverage its strong brand recognition and extensive network, particularly in the European region, to maintain its lead.

    Services Offered

    BKNG offers a comprehensive range of travel-related services, including accommodations, flights, car rentals, and restaurant reservations. Its diverse portfolio allows it to cater to various aspects of a traveler’s journey, creating a one-stop-shop experience. In contrast, competitors like Airbnb focus primarily on accommodations and experiences, while Expedia provides a similar range of services to BKNG but with different branding and customer loyalty programs.

    Customer Base and Growth Prospects

    BKNG’s customer base is global, with a significant presence in Europe, which has been a key strength for the company. It has demonstrated a consistent ability to grow its customer base by offering a user-friendly platform and competitive prices. The company’s growth prospects remain strong, with a Compound Annual Growth Rate (CAGR) of net income from 2010 to 2019 at 27.99%, outpacing Expedia’s CAGR of 3.30% during the same period. This difference in net income growth has been crucial for BKNG to improve its OTA market leadership.

    Analyst Opinions on Booking Holdings

    Analysts have shown confidence in Booking Holdings, with Ascendiant Capital’s Edward Woo raising the price target on the company’s stock from $3,700 to $3,900, while maintaining a Buy rating. The optimism stems from the return of the travel industry to normalcy and the potential for further growth. Similarly, Wedbush Securities has identified Booking Holdings as its top online travel pick for 2024, with a price target lift to $3,850.

    Booking Holdings’ Financial Performance and Growth

    In 2020, Booking Holdings saw its revenue plummet by 63% from the previous year due to the pandemic. However, by 2022, the company’s revenue bounced back to 126% of pre-pandemic figures, demonstrating a remarkable recovery. The company’s mobile app has been particularly successful in the US, accounting for 60% of nights reserved. Additionally, more than 400,000 travel providers have been awarded Booking Holdings’ Travel Sustainable Badge, indicating a commitment to sustainable practices.

    For the full year 2023, Booking Holdings reported gross travel bookings of $150.6 billion, a 24% increase from the prior year. Room nights booked increased by 17%, total revenues reached $21.4 billion (a 25% increase), and net income grew by 40% to $4.3 billion. These figures highlight the company’s robust recovery and growth momentum.

    The Travel Industry Outlook for 2024

    The travel industry is expected to continue its growth trajectory in 2024. Global travel demand is likely to increase, and analysts have upgraded ratings for companies in the online travel sector, including Booking Holdings. Despite a setback in the fourth quarter due to non-recurring losses from a pension case in the U.K. and a pending anti-competition issue, the overall performance of Booking Holdings has been strong.

    While most experts do not anticipate global tourism to recover to 2019 levels until the end of 2024, Booking Holdings has already surpassed pre-pandemic performance. By 2022, the total number of room nights sold by Booking.com was 6% above 2019 levels, and revenue from gross travel bookings had increased.

    Conclusion

    Based on the analysis of financial data and analyst opinions, Booking Holdings is well-positioned for continued success in the travel industry. The company’s ability to rebound from the pandemic and achieve growth beyond pre-pandemic levels is indicative of its strong market position and effective business strategies. With the travel industry expected to maintain its upward trend in 2024, Booking Holdings is likely to capitalize on this momentum, further solidifying its status as a leader in the online travel services market.

    The optimistic outlook of analysts, coupled with the company’s solid financial performance, suggests that Booking Holdings has significant growth potential. Investors and stakeholders can be reassured by the company’s resilience and adaptability in the face of industry challenges. As the travel industry progresses towards a full recovery, Booking Holdings is poised to reap the benefits of an increasingly connected and mobile-first world.

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