On Thursday, JPMorgan expressed a positive outlook on Booking Holdings (NASDAQ:BKNG), increasing the price target to $5,235 from the previous $3,860 while maintaining an Overweight rating. The firm's analysis highlighted Booking Holdings' third-quarter performance, which surpassed expectations with shares closing at an all-time high.
The company's room nights grew by 8% year-over-year in the third quarter, beating the high end of the forecast by three percentage points and showing acceleration from 7% growth in the second quarter. This growth is anticipated to continue into the fourth quarter with expectations of a 6-8% increase, which analysts believe will also exceed investor expectations.
The positive results were attributed to improvements in Europe that started in August and continued through the end of October, as well as an expansion in booking windows. Notably, the company is seeing benefits on its bottom line, with adjusted EBITDA margins expected to expand by over 100 basis points in 2024.
Booking Holdings is currently the only travel company in JPMorgan's coverage set to experience margin expansion this year.
The analysis also pointed out a deceleration of room night growth in the United States from mid-single-digit percentages year-over-year in the second quarter to low-single-digit percentages in the third quarter. In contrast, growth in Europe shifted from mid-single-digit to high-single-digit percentages. This could suggest that the results for other travel companies such as Expedia (NASDAQ:EXPE) and Airbnb (ABNB) may not be as robust.
JPMorgan's continued confidence in Booking Holdings is reinforced by improving trends in Europe, a key area of concern following the second quarter. The firm also commends the company's effective execution of strategic initiatives, including alternative accommodations, the Connected Trip, increasing direct and loyalty bookings, generative AI, and regional expansion.
These factors, coupled with aggressive capital returns, are expected to drive double-digit percentage earnings per share growth over multiple years.
The new price target of $5,235, set for December 2025, is based on approximately 22.5 times JPMorgan's estimated 2026 GAAP earnings per share, which equates to around 17 times the firm's estimated 2026 adjusted EBITDA.
In other recent news, Booking Holdings has been in the spotlight following its third-quarter financial results, which surpassed consensus expectations. The company reported an 8% growth in room nights and gross bookings valued at $43.4 billion, a 9% increase from the previous year.
This performance led to an adjusted profit of $83.89 per share and total revenue of $7.99 billion for the quarter, both surpassing analyst expectations.
In response to these developments, Piper Sandler raised its price target for Booking Holdings to $4,900, BTIG adjusted its EPS estimate from $200 to $208, and Barclays raised its price target to $5,100. These upward revisions reflect the company's strong performance and confidence in its prospects.
In other recent news, Booking Holdings has also been the subject of various analyst assessments. Benchmark reaffirmed its Buy rating, while Goldman Sachs maintained a Neutral rating, and Truist Securities initiated coverage with a Hold rating.
InvestingPro Insights
Booking Holdings' strong performance, as highlighted in JPMorgan's analysis, is further supported by real-time data from InvestingPro. The company's market capitalization stands at an impressive $149.65 billion, reflecting its dominant position in the travel industry. Booking's revenue for the last twelve months as of Q2 2024 reached $22.4 billion, with a robust revenue growth of 15.81% over the same period.
InvestingPro Tips reveal that Booking Holdings has been aggressively buying back shares, which aligns with JPMorgan's mention of "aggressive capital returns." This strategy often signals management's confidence in the company's future prospects. Additionally, the company boasts impressive gross profit margins, which stood at 84.57% for the last twelve months as of Q2 2024, underscoring its operational efficiency.
The company's strong financial health is further evidenced by its high return over the last year, with a one-year price total return of 61.17%. This performance supports JPMorgan's optimistic outlook and increased price target.
For investors seeking more comprehensive insights, InvestingPro offers 16 additional tips for Booking Holdings, providing a deeper understanding of the company's financial position and market dynamics.
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