Stock analysis Booking Holdings (BKNG)

 

Booking Holdings is committed to helping everyone in the world travel the way they want through our platform. It offers a wide range of accommodation, car rental, meal reservations, airline tickets, hotel reservations, and travel insurance. As the number one online travel booking service provider, our six major brands are Booking.com, KAYAK, Priceline, Agoda, Rentalcars.com and OpenTable. Most of its sales come from connecting accommodation reservations, with global demand around 90%.

In 2020, due to the impact of COVID-19, many countries have imposed travel restrictions, which hurt our travel-related booking sales.

Sales of lodging, rental cars, and flight reservation services all fell sharply compared to the previous year. Travel reservation cancellations have skyrocketed as a result of COVID-19.

Agency-wide booking sales related to travel declined 91.8% on a quarterly basis from the previous year, and Merchant services declined 88%.

Due to the sharp decline in sales, our net profit remained in the black on a quarterly basis but recorded a loss of $619 million on a half-year basis.

The company is actively responding to the hit from COVID-19. Increased short-term debt of $4.1 billion to secure working capital and solve liquidity issues. The restructuring of the Agoda, Kayak, and OpenTable brands resulted in layoffs of about 1700 employees. It applied for government policy to support employee wages and stopped buying treasury shares. Also, the company canceled unnecessary business meetings and reduced marketing costs.

In the long term, the company expects the global economy and travel market to overcome and recover from COVID-19, and the growth rate of the online travel-related booking industry will slow down somewhat as the market matures. However, it has confirmed the growth potential of our existing business prior to COVID-19, and it expects our position to remain solid even in the mature market. In addition, it will provide new services that provide opportunities for business growth. Not only large accommodations such as hotels, but also smaller accommodations such as houses and apartments will be able to utilize its platform.

The figure on the left is Booking Holdings, and the figure on the right is the industry average. Its ROE is around 38%, 10% P higher than the industry average. This appears to be due to the monopoly with Expdiea in the travel-related booking business. The average 5-year EPS growth rate is 19.53%, which is growing rapidly. Current ratio is 2.93, which is excellent in short-term debt repayment ability, but LT Debt to Equity is about 266%, which is a level of debt that is somewhat overwhelming in debt payment ability. Asset turnover is 0.53. No dividends are paid. Thanks to the high growth rate of the industry, it is putting weight on business expansion.

Booking Holdings is the #1 provider of travel-related booking services. In the 2010s, it has increased its market share through aggressive M&A and is growing rapidly. The market share is first in Europe and second in the North American continent. The travel-related industry is hit hard by the COVID-19 impact, and we are also having a difficult time with sales dropping 82% year-on-year. Nevertheless, the global economy will overcome COVID-19 and the travel industry will recover slowly. The lives of people who use travel booking services online will not be very different after COVID-19.