Who would have thought that two years in we’d all still be a little edgy about socializing, travelling and generally getting out there as COVID vaccines take hold and the world opens up once again. And while sipping eggnog with the relatives, indoors and masks off, seems pretty doable, what about getting on a plane and heading for France? If that prospect is still a personal no-go, you might be surprised to learn that portfolio manager Stan Wong is hyping online travel and reservation giant Booking Holdings (Booking Holdings, Stock Quote, Charts, News, Analysts, Financials NASDAQ:BKNG).
“I love contrarian plays,” said Wong, director of wealth management at Scotia Wealth, who spoke on BNN Bloomberg on Wednesday. “I think it makes a lot of sense to sometimes go against what the market feels because the market always looks at things on a short-term basis while we try and look at what will happen in the next six to 12 months. And, really, the stock market does that as well.”
Wong has nominated Bookings as one of his three top picks for the upcoming year, saying the depth and breadth of its offerings are what should be attractive to investors, along with the on-sale stock price.
“It’s the world’s largest online travel agency by revenue, it’s operating and offering booking services in over 220 countries for airline tickets, vacation rooms, rental cars, restaurant reservations. Its six primary brands include Priceline, booking.com, Agoda, rentalcars.com, Kayak and OpenTable,” he said.
“I feel that with COVID-19 vaccinations and booster shots accelerating worldwide and extending into children under the age of 12 and so forth — and also we’re seeing the onset of highly effective anti-viral pills coming from Pfizer and Merck at some point soon — this tremendous pent up consumer demand for travel could boosts bookings revenues well beyond pre-pandemic levels,” Wong said.
$95 billion market cap Booking Holdings has made a couple of big deals this month, announcing agreements to acquire both Getaroom, a B2B distributor of hotel rooms, and global flight booking provider Etraveli Group. The Getaroom purchase has been priced at $1.2 billion while the Etraveli deal is at €1.63 billion.
“As international air travel rebounds from the impact of the pandemic, we look forward to building upon our existing relationship with Etraveli Group to make the travel booking experience easier and more seamless to support our partners and customers,” said Booking CEO Glenn Fogel in a November 23 press release.
A sign of how travel is once again on peoples’ minds, Booking reported a 77 per cent year-over-year increase in gross travel bookings in its third quarter 2021, delivered earlier this month, while room nights booked for the quarter were up 44 per cent compared to a year earlier.
Third quarter revenues were also up 77 per cent to $4.7 billion while non-GAAP net income was $1.6 billion, up 209 per cent, or $37.70 per diluted share. That proved a beat of analysts’ consensus expectation of $32.90 per share.
“We are pleased to report another quarter of sequential improvement in room night trends, which was primarily driven by better results in Europe. Revenue in our seasonally strongest third quarter was $4.7 billion, which was more than double the amount of revenue we recognized in the second quarter of 2021,” said Fogel in a November 3 press release. “We are encouraged by the signs of recovery we saw in many parts of the world in the third quarter, and our teams are working hard to continue to strengthen our company’s position and execute against our strategic priorities.”
Looking ahead to the fourth quarter, Booking management said October’s room nights were down ten per cent compared to 2019 numbers but that was less of a decline than the 14 per cent in September compared to 2019’s similar period. But the company said rising COVID case counts in Europe related to the Delta variant have put a new uncertainty to business in November and December.
But Booking saw airline tickets booked in the third quarter go up 131 per cent versus the comparable Q3 in 2019, with strong results from Priceline and Booking .com, an encouraging sign.
Wong says investors should take advantage of this moment in time to pick up Booking at current levels. So far, BKNG is up four per cent for 2021.
“I think there a thing such as revenge travel out there that people really want to make up for the lost time over the last couple of years. We do expect that Booking’s forecasted revenue next year will come in at about $16 billion. That’s going to surpass pre-pandemic levels,” Wong said.
“Yes, with renewed restrictions in Europe Booking shares have come off about 15 per cent so far this month — I think that provides an opportunity for investors that can look out six or 12 months,” he said.
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