On Friday, RBC Capital Markets updated its outlook on Booking Holdings (NASDAQ:BKNG), significantly increasing the price target to $5,250 from the previous $3,900, while maintaining an Outperform rating on the stock. The revision follows the company's third-quarter performance, which exceeded expectations.
The analyst at RBC Capital highlighted that the consumer weakness noted in the previous quarter did not have as much impact as anticipated, and Booking Holdings effectively capitalized on the stabilizing and rebounding demand. This was particularly evident in the European alternative accommodations sector.
The report suggested that Booking Holdings' recent results could shift investor perception, potentially valuing the company's brand more similarly to Airbnb (NASDAQ:ABNB) and reducing the discount for its dependency on lead generation.
According to the analyst, Booking Holdings' third-quarter results make a compelling argument for this revised perspective. The company achieved room night growth without increasing marketing expenditures, saw a rise in mobile app usage, and added a significant number of new supply offerings. These factors contribute to the belief that Booking Holdings is currently the top investment choice within the travel industry.
RBC Capital has adjusted its estimates for Booking Holdings upward, setting the new price target based on a 20.7 times multiple of the firm's projected 2025 EBITDA. The analyst's comments suggest confidence in the company's continued performance and its ability to maintain a dominant position in the market.
In other recent news, Booking Holdings showcased a robust financial performance in the third quarter. The company reported a 9% year-over-year increase in gross bookings, surpassing Susquehanna's estimates. This growth was reflected in its revenue, which also grew by 9%. The earnings before interest, taxes, depreciation, and amortization (EBITDA) reached $3.7 billion, surpassing projections. The non-GAAP earnings per share (EPS) of $83.89 was 11% higher than Susquehanna's estimate.
These developments led Susquehanna to raise its price target for Booking Holdings from $4,100.00 to $5,500.00, maintaining a positive rating on the stock. In addition to these financial highlights, Booking Holdings reported nearly 300 million room nights booked, marking an 8% year-over-year increase. The company is also advancing strategic initiatives such as enhancing alternative accommodations and developing AI capabilities.
Booking Holdings' full-year projections have improved, with gross bookings expected to increase by around 8%, and revenue growth anticipated to be just below 10%. The company also aims for adjusted EBITDA growth of 13-14% and adjusted EPS growth in the high teens. These recent developments indicate strategic growth in the travel industry.
InvestingPro Insights
Booking Holdings' recent performance aligns with several key metrics and insights from InvestingPro. The company's market capitalization stands at an impressive $154.77 billion, reflecting its strong position in the travel industry. This is further supported by an InvestingPro Tip indicating that Booking Holdings is a "prominent player in the Hotels, Restaurants & Leisure industry."
The company's financial health is robust, with a revenue of $23.05 billion over the last twelve months as of Q3 2024, and a revenue growth of 11.74% during the same period. This growth is complemented by an impressive gross profit margin of 84.67%, which aligns with another InvestingPro Tip highlighting "impressive gross profit margins."
Investors should note that Booking Holdings is trading at a P/E ratio of 30.59, which some may consider high. However, this valuation could be justified by the company's strong market position and growth prospects, as evidenced by the recent analyst upgrade. An InvestingPro Tip also points out that the stock has seen a "significant return over the last week," with a 7.55% price total return in the past week.
For those interested in a deeper analysis, InvestingPro offers 20 additional tips on Booking Holdings, providing a comprehensive view of the company's financial health and market position.
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