Booking Holdings is the IBD Stock of the Day for Tuesday. With Memorial Day marking the start of a typically busy travel summer season, Booking stock has formed a handle on a double-bottom base.
The parent company of Booking.com, Priceline and other travel sites is coming off a better-than-expected first quarter report. Still, Booking stock has gained just 7% so far this year compared to a 10% gain for the S&P 500.
On the stock market today, Booking stock gained 1% to close at 3,801.36. A recent high of 3,853 could serve as a buy point on the chart's new handle.
Last year, shares of Booking Holdings racked up a 76% gain amid a hot market for travel. Investors are still debating the strength of travel demand this year. Booking shares fell, along other travel stocks, after American Airlines cut its sales guidance for the second quarter.
But analysts overall expect a strong market for summer travel, with Booking positioned to benefit.
Booking Stock: Q1 Revenue Up 17%
Booking stock gained 3% in trading following its first-quarter earnings report on May 2. Adjusted earnings increased 76% year-over-year to $20.39 per share while sales advanced 17% to $4.4 billion.
Both numbers exceeded expectations from analysts. Chief Executive Glenn Fogel told Booking stock analysts following the report that the company "continue(s) to see resiliency in global leisure travel demand, including healthy growth for travel on the books that's scheduled to take place during our peak summer travel season."
He cautioned, however, that those trips are still cancelable. Further, the company is anticipating "some deceleration" in room night growth in the second quarter compared to the Q1 growth. Booking's Q1 revenue also benefits from the earlier timing of the Easter holiday.
"BKNG's impressive Q1 beat may have benefited from some timing tailwinds, considering the Q2 outlook embeds a sizable deceleration and implies (first half) growth is roughly consistent with the prior fiscal year outlook," Jefferies analyst John Colantuoni wrote to clients following the report. "That said, BKNG generally guides with room for upside and has a strong track record of delivering, which causes us to focus on results over guidance."
Debating Summer Travel
Investors are closely watching for indicators on whether consumers will keep spending on travel.
After American Airlines cut its guidance on May 29, Booking stock lost 1.5%, Airbnb closed slightly lower and travel companies such as Carnival Cruise Line and Marriott International fell. Booking rival Expedia Group traded flat on the day.
Most indicators, however, point to a strong summer travel season.
Wedbush analyst Scott Devitt wrote in a May 23 client note that "alternative accommodation trends remain favorable, hotel performance continues to show modest growth with more strength internationally, and recent industry commentary suggests a healthy summer travel season ahead."
Devitt holds a bullish outperform rating on Booking stock.
Further, a recent U.S.-focused survey by Bank of America found that 70% of respondents are planning summer travel, with millennials and Gen Z planning to "go away for longer and spend more compared to previous years."
Booking Stock: Projections For 2024
For the full year, analysts project Booking Holdings earnings will increase 16% to $176 per share and sales will increase 9% $23.2 billion.
Sales growth has decelerated as Booking Holdings gets further from the rapid revenue decline caused by the Covid-19 pandemic in 2020. Sales jumped 61% year-over-year in 2021, advanced 56% in 2022 and grew 25% in 2023.
Meanwhile, Booking stock had an IBD Composite Rating of 95 out of a best-possible 99 as of Tuesday, according to the IBD Stock Checkup tool. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
The score makes Booking stock the top ranked among 20 in the Leisure-Travel Booking industry group tracked by Investor's Business Daily.
Further, Booking's IBD Relative Strength Rating was a strong 86 out of 99.
