By Callum Keown
Booking Holdings’ ticked all the boxes with its earnings–beating revenue and profit estimates, breaking a number of company records, and initiating a quarterly dividend. Yet the stock plummeted 9% ahead of the open Friday.
The travel industry’s stellar 2023 has posed a major problem so far this year — investors are facing up to the prospect of normalizing demand and growth in 2024.
Booking also warned of the impact of the conflict in the Middle East, which hit the number of nights booked in the fourth quarter and is expected to do the same in the first three months of the year.
The stock has had an impressive run recently, climbing 61% over the past year, and 10% so far in 2024 through Thursday’s close. But all good things come to an end, or at least take a pause.
Booking issued guidance for gross bookings and revenue growth of slightly above 7% in 2024. That’s after a 24% jump in bookings and a 25% rise in revenue last year.
“We believe a travel normalization was largely expected for 2024, but given the recent stock move and elevated expectations, the deceleration is steeper than expected, and growth is also below Expedia’s 10% guide, ” J.P. Morgananalyst Doug Anmuth said in a note. He maintained an Overweight rating on the stock, and said Booking could beat its guidance amid strong travel demand.
“Growth expectations will reset to lower levels coming out of the quarter, but execution remains strong and we believe the guide likely will end up being conservative,” he added.
Citi analyst Ronald Josey also stuck to a Buy rating on Booking’s shares and said it “remains among the best operators in across the internet sector.”
“Going forward, the debate is likely to focus on the overall health of OTAs (online travel agencies) following relatively in-line results and lower guidance from Booking, Airbnb and Expedia,” he added.
It was a similar story for Expedia after its earnings earlier this month. The online travel company’s stock plunged 18% — its biggest daily drop in nearly four years–after it said revenue would moderate in 2024.
Airbnb also said it expects the growth rate of nights booked on its platform to moderate in the first quarter, though the stock avoided the steep loss suffered by Expedia. Both stocks fell early Friday.
Booking’s post-earnings stock move looked set to land somewhere in the middle of its two rivals, as it fell 9% ahead of the open. Aside from a deceleration, Booking also said the conflict in the Middle East was set to hit growth.
The number of room nights booked jumped 9.2% to 231 million in the fourth quarter. However, excluding business associated with Israel, nights booked rose 11% compared to the same quarter last year. CEO Glenn Fogel said the business in the country was “significantly impacted by the war.” Booking expects another 1 percentage point impact in the first quarter.
The company reported adjusted earnings of $32 per share on revenue of $4.8 billion–both narrowly beating Wall Street’s expectations.
For the full-year Booking set several new records, notching its higher ever gross bookings, revenue, and operating income. It also surpassed 1 billion nights booked on its platforms for the first time.
But the record-breaking year is already in the past for investors, who need to adapt to a more normal year of travel.
Write to Callum Keown at callum.keown@barrons.com