Booking (NASDAQ:BKNG) Surprises With Q1 Sales, Stock Soars

Full Report / May 02, 2024

Online travel agency Booking Holdings (NASDAQ:BKNG) reported Q1 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 16.9% year on year to $4.42 billion. It made a non-GAAP profit of $20.39 per share, improving from its profit of $11.58 per share in the same quarter last year.

Booking (BKNG) Q1 CY2024 Highlights:

  • Revenue: $4.42 billion vs analyst estimates of $4.26 billion (3.7% beat)
  • Adjusted EBITDA: $898 million vs analyst estimates of $721 million (large beat)
  • EPS (non-GAAP): $20.39 vs analyst estimates of $14.19 (43.7% beat)
  • Free Cash Flow of $2.57 billion, up 106% from the previous quarter
  • Room Nights Booked: 297 million, up 23 million year on year
  • Market Capitalization: $116.7 billion

Formerly known as The Priceline Group, Booking Holdings (NASDAQ:BKNG) is the world’s largest online travel agency.

Its businesses span the range of travel offers including Booking.com, Rentalcars.com, Priceline, Agoda (Asia Pacific focused OTA), Kayak (price comparison site), and Opentable (restaurant reservations).

For consumers, Booking Holdings simplifies planning travel, by aggregating supply of hotels, flights, and experiences and using its scale and rewards programs to offer the best prices, while for suppliers, Booking delivers the largest audience of travel shoppers online.

Historically, Booking has held its largest market share in Europe, specifically in hotels, while it has long sought to take market share from market leader Expedia in North America. In 2015 it acquired HomeAway to build up an alternative accommodations business to compete with AirBnB.

Online Travel

Because of the enormous number of flights, hotels, and accommodations available, travel is a natural fit for marketplaces that aggregate suppliers, simplifying the shopping process for consumers. Online travel platforms today make up over 50% of the industry’s bookings, a percentage that has been rising for 20 years, and will likely continue in the years ahead.

Booking Holdings (NASDAQ:BKNG) competes with a range of online travel companies such as Expedia (NASDAQ:EXPE), Airbnb (NASDAQ:ABNB), TripAdvisor (NASDAQ:TRIP), Trivago (NASDAQ:TRIV) and Alphabet (NASDAQ: GOOG.L).

Sales Growth

Booking's revenue growth over the last three years has been incredible, averaging 73.7% annually. This quarter, Booking beat analysts' estimates and reported 16.9% year-on-year revenue growth.

Booking Total Revenue

Ahead of the earnings results, analysts were projecting sales to grow 6.3% over the next 12 months.

Usage Growth

As an online travel company, Booking generates revenue growth by increasing both the number of stays (or experiences) booked and the commission charged on those bookings.

Over the last two years, Booking's nights booked, a key performance metric for the company, grew 26% annually to 297 million. This is fast growth for a consumer internet company.

Booking Room Nights Booked

In Q1, Booking added 23 million nights booked, translating into 8.4% year-on-year growth.

Revenue Per Booking

Average revenue per booking (ARPB) is a critical metric to track for consumer internet businesses like Booking because it not only measures how much users book on its platform but also the commission that Booking can charge.

Booking ARPB

Booking's ARPB growth has been decent over the last two years, averaging 7.8%. The company's ability to increase prices while constantly growing its nights booked demonstrates the value of its platform. This quarter, ARPB grew 7.8% year on year to $14.87 per booking.

User Acquisition Efficiency

Consumer internet businesses like Booking grow from a combination of product virality, paid advertisement, and incentives (unlike enterprise software products, which are often sold by dedicated sales teams).

It's relatively expensive for Booking to acquire new users as the company has spent 51.4% of its gross profit on sales and marketing expenses over the last year. This level of efficiency indicates that Booking has to compete for its users and continue investing to maintain its growth trajectory.

Profitability & Free Cash Flow

Investors frequently analyze operating income to understand a business's core profitability. Similar to operating income, adjusted EBITDA is the most common profitability metric for consumer internet companies because it removes various one-time or non-cash expenses, offering a more normalized view of a company's profit potential.

This quarter, Booking's EBITDA came in at $898 million, resulting in a 20.3% margin. Additionally, Booking has demonstrated extremely high profitability over the last four quarters, with average EBITDA margins of 33.7%.

Booking Adjusted EBITDA Margin

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Booking's free cash flow came in at $2.57 billion in Q1, down 8.1% year on year.

Booking Free Cash Flow

Booking has generated $6.77 billion in free cash flow over the last 12 months, an eye-popping 30.8% of revenue. This robust FCF margin stems from its asset-lite business model and scale advantages, giving it the option to return capital to shareholders or reinvest in its business while maintaining a healthy cash balance.

Key Takeaways from Booking's Q1 Results

It was great to see Booking beat analysts' revenue expectations this quarter. The company also smashed adjusted EBITDA estimates. Overall, this quarter's results were great and shareholders should feel optimistic. The stock is up 5.9% after reporting and currently trades at $3,688.02 per share.

Is Now The Time?

When considering an investment in Booking, investors should take into account its valuation and business qualities as well as what's happened in the latest quarter.

There are numerous reasons why we think Booking is one of the best consumer internet companies out there. While we'd expect growth rates to moderate from here, its revenue growth has been exceptional over the last three years. Additionally, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits and its impressive gross margins are a wonderful starting point for the overall profitability of the business.

At the moment, Booking trades at 15.1x next 12 months EV-to-EBITDA. Looking at the consumer internet landscape today, Booking's qualities really stand out, and we really like it at this price.

Wall Street analysts covering the company had a one-year price target of $3,971 per share right before these results (compared to the current share price of $3,688), implying they saw upside in buying Booking in the short term.

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