Why Booking (BKNG) Stock Is Nosediving
What Happened:
Shares of online travel agency Booking Holdings (NASDAQ:BKNG) fell 9.8% in the morning session after the company reported fourth-quarter results that narrowly topped analysts' revenue expectations on better-than-expected gross bookings. It also expanded its user base, which is good to see. However, the number of airline tickets, rental car days, and room nights sold during the quarter fell below Wall Street's expectations. Room nights grew 9% year on year ( versus 15% growth in the previous quarter), signaling a significant demand deceleration. A similar growth decline can be observed in the number of rental car days sold (+11% y/y vs. 20% y/y growth in the previous quarter). The company noted that cancellation rates were above the trend observed in the previous year due to "the war in the Middle East". In Q1'2024, it expects a negative 1% impact on Q1 room night growth due to the Middle East conflict while anticipating a similar impact on the full-year 2024 growth rate. Zooming out, this was a mixed but weaker quarter.
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What is the market telling us:
Booking's shares are somewhat volatile and over the last year have had 2 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 7 months ago, when the stock gained 11% on the news that the company reported second-quarter results that beat analysts' expectations for revenue, gross bookings and earnings per share. Operating metrics such as hotel rooms and airline ticket sales came ahead of Consensus. Unit economics also moved in the right direction. Management added some positive comments on demand trends stating that "In the second quarter, we continued to see robust leisure travel demand, which helped drive stronger than expected room nights and gross bookings results in the quarter."
Overall, this was a really good quarter that should please investors, especially after the company's closest peer Expedia reported somewhat disappointing results.
Booking is up 1.3% since the beginning of the year, but at $3,527 per share it is still trading 9.6% below its 52-week high of $3,902 from February 2024. Investors who bought $1,000 worth of Booking's shares 5 years ago would now be looking at an investment worth $1,866.
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