Last week saw the newest first-quarter earnings release from Booking Holdings Inc. (NASDAQ:BKNG), an important milestone in the company's journey to build a stronger business. Revenues of US$2.3b beat expectations by 4.4%. Unfortunately statutory earnings per share (EPS) fell well short of the mark, turning in a loss of US$17.01 compared to previous analyst expectations of a profit. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the recent earnings report, the consensus from 29 analysts covering Booking Holdings is for revenues of US$7.08b in 2020, implying a painful 51% decline in sales compared to the last 12 months. Earnings are expected to tip over into lossmaking territory, with the analysts forecasting statutory losses of -US$13.00 per share in 2020. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$8.80b and earnings per share (EPS) of US$28.40 in 2020. There looks to have been a major change in sentiment regarding Booking Holdings' prospects following the latest results, with a real cut to revenues and the analysts now forecasting a loss instead of a profit.
There was no major change to the consensus price target of US$1,644, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Booking Holdings at US$2,250 per share, while the most bearish prices it at US$1,030. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with the forecast 51% revenue decline a notable change from historical growth of 12% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 17% next year. It's pretty clear that Booking Holdings' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts are expecting Booking Holdings to become unprofitable next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at US$1,644, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Booking Holdings analysts - going out to 2024, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 2 warning signs for Booking Holdings you should know about.
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