TheLike most travel stocks, Reservation collectibles (NASDAQ: BKNG) hit hard by the epidemic. However, the owner of Booking.com, Priceline and other online travel sites has seen his stock reach an all-time high in recovery. However, revenue and profits remain below pre-pandemic levels.
In this episode of “Beat and Raise” Registered on November 4thFool shareholders Jeremy Bowman and Jason Hall detailed Booking’s third-quarter earnings report, discussing trends to watch in the travel industry.
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Jeremy Bowman: Reservation collectibles. This is the company formerly known as Priceline.
Jason Hall: I still think of it as Priceline, I really do.
Bowman: Yes. Priceline’s is one of the most popular brands in the US, I think.
Bowman: But they renamed the company after booking.com, which is really strong in Europe.
Hall: Right, a huge job.
Bowman: Yes, exactly. This is the main driver of their business there. They have six brands, this is an online travel agency, which is the largest online travel agency in the world. Booking.com, Priceline, Kayak, OpenTable, Agoda, focusing on Asia.
Hall: Hi, Jeremy. If you don’t mind, can you hit the “submit” button, and make it a little bigger for our viewers.
Bowman: Yes really.
Hall: Just to the left of the Go button. There you are, awesome.
Bowman: awesome thanks.
Hall: just awesome.
Bowman: Okay. Yes [laughs]. Then Agoda, an Asia-focused company, and Rentalcars.com. Obviously, like most travel companies, its revenue slumped in the last year’s quarter, down 50 percent with COVID. I think one of the most important things to understand with Booking is that there are two types of forms with online travel agencies. There is an agency form which is where they list hotels with you and take commission from their reservations. This is what most of Booking’s revenue comes from. Then there is the merchant model that Expedia The online travel agency tends to prefer it, which is the online travel agency that buys the set of rooms and then resells them. This is a bit more risky and tends to be a lower margin business.
So, the third quarter results. Revenue rose 77 percent to $4.68 billion. That was well above estimates of $4.3 billion. It was still down seven percent from the third quarter in 2019. Business is close to pre-pandemic levels but has not yet fully recovered. Earnings per share tripled from a year ago to $37.70. That was before the consensus at $30.90. But it’s still down back from $45 two years ago. 36. The company did not provide specific guidance, but they said that revenue will decline further compared to 2019 in the fourth quarter. This was for technical reasons. There’s high season in Europe, and there’s the third quarter, so they’re off to that. Then they find out that the booking windows, as things start to reopen, people have been booking flights for the next week or so in a few days. Since this results in an extension of revenue, it is paid to a later date.
I think the stock was up about 2 percent today the last time I looked. I think something you should be aware of here is that we have the graph. This is the last five-year chart. It is actually poorly performing. Historically, this is a great stock, but it has been underperforming in the past five years and has been lagging behind Standard & Poor’s This year too. The competitive landscape is changing. In travel as we know, there is an ascent Airbnb In home sharing. Booking does a lot of apartment rentals through their site, but it doesn’t have its own brand. Obviously, there’s Airbnb, Expedia, Vrbo, and there are some others out there. Tripadvisor He is just getting into it. Historically they have had large margins. They are the industry leaders based on total bookings. But I think this company to me is as much a question mark as it will look after the pandemic. I think there will be more telecommuting, and less business travel. There is something home sharing. I’d like to see how the next few quarters go for them and we’ll see who’s there.
Hall: Yes. Just think of the bigger trends. I think you did pretty well there in the end. Bottom line, how much is essentially the most important hotel business? This is the person at risk of being disabled by an Airbnb transformation. When your most important clients are dealing with a potential disruption, it’s really important to keep an eye on it. How does the thesis affect this work? They are still major leaders in this reservation and will be for a long time. But how much of that market will be ceded to Airbnb?
Bowman: Absolutely, yes. It reminds me a little, “Your margin is my opportunity.” While they have a huge business, they are the industry leaders, but that also makes them vulnerable to disruption, I think.
Hall: Yes, I think you are right. The economics are still really good as we see here. You definitely just want to pay more attention as trends change to see how they affect their business.
Jason Hall owns stock in Airbnb, Inc. and TripAdvisor. Jeremy Bowman owns stock in Airbnb, Inc.. Motley Fool owns stock in Airbnb, Inc. Booking Holdings and TripAdvisor recommend and recommend it. Motley Fool has a disclosure policy.
The opinions and opinions expressed here are those of the author and do not necessarily reflect the views and opinions of Nasdaq, Inc.