Company Name: Booking Holdings
Entry Price: $1,710
Target Price: $1,900
Projected Yield: 11.10%
Time Line: 3 to 6 months
About Booking Holdings
Booking Holdings owns Booking.com, one of the large online hotel, restaurant, and other service booking systems. Booking.com connects the customers with the tourist service providers across the globe. The service offers consumers various options for booking accommodation through its core brands: Booking.com, priceline.com, and agoda.com.
What's the Idea?
Capitalize on Booking Holdings stock that may rise amid the gradual recovery of the tourism\ market and the business adapting to new conditions.
Buy Booking Holdings Shares >>
Why Trade Booking Holdings?
Reason 1: Recovery after Lockdown
The pandemic had the greatest impact on the tourism business, as a result of which it significantly affected Booking Holdings earnings. The company suffered a record loss over the last 10 years, which nevertheless turned out to be better than the consensus. The Q2 earnings decreased by 83.60%, amounting to $630 million, against the expected $559 million, while the loss per share was $10.80 against the expected $11.80.
The travel market is, however gradually recovering: in July, the number of new bookings was 75% of last year's figure, which is three times better than in April, when the figure was at 25% of the pre-crisis level. Another sign of market recovery is the recent positive financial result of China's Trip.com, which indicates an improvement in Chinese travel industry. The recovery of tourism in China could pull the global tourism market with it. However, at the moment, the main driver for the complete recovery is still the mass vaccination against COVID-19, which is expected to be released in winter.
Reason 2: Business Adapting to New Conditions
The temporary international travel issues contributed to the re-orientation of the demand. Currently, the key demand for bookings comes from people traveling within their country or region for a short time. Booking.com management said this trend arose because people work remotely, travel not very far, and book accommodation near their residence. This trend may help maintain a stable financial condition and an appropriate level of cash liquidity amidst the pandemic.
Besides, the company's management started to actively pursue a cost-cutting program, which includes a 25% reduction in staff in the coming months. This may reduce costs by $250M to $300M. In case this is successful, the company's margin may significantly improve, which will have a positive impact on the stock price.
Still, the demand for business travel is weakening, and this contributes to some negative outlook. Business video conferencing is becoming more and more popular, which challenges the business travel practice as it is.
Reason 3: Stable Financial Position
Despite a significant decline in Q2 2020 earnings, the company is still strong, financially. In Q2, Booking had a positive free cash flow, which amounted to $52 million. The debt burden level is fine ($10 billion), as the company still has a huge amount of cash on its balance sheet (more than $10 billion). The existing cash pile may allow Booking to survive these hard times and wait for the travel market to recover. Besides, the company may grow inorganically with M&A deals.
The company does not pay any dividends and has so far suspended its buyback program, which it had been actively promoting for the last few years. Maintaining these conditions may help the company survive the current circumstances without any particular issues and adapt to the new realities.
How to Use the Idea
- Buy Booking Holdings stock at $1,710.
- Allocate no more than 2% to 4% of your portfolio amount. To build a balanced portfolio, you can use our analysts' recommendations for USD or EUR portfolios.
- Sell the stock when the price is at $1,900 per share.
How to Buy Booking Holdings Shares?
If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.
After opening an account, you can buy shares in either of the following ways:
Freedom24 Web Platform: Go to the Web Terminal section, type BKNG.US (Booking Holdings ticker in the NASDAQ) in the search box, and select Booking Holdings in the search results. Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.
Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that will show up, type BKNG.US (Booking Holdings ticker in the NASDAQ) and select Booking Holdings in the search results. You will then see Booking Holdings stock in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of shares you want to buy and click Buy.
Buy Booking Holdings stocks and capitalize on the recovering travel industry!
Buy Booking Holdings Shares >>
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