Booking Holdings (BKNG), which just last week (Feb 21) changed its name and ticker symbol from Priceline.com (PCLN), is trading sharply higher today (+9%) after reporting strong Q4 results.
Just to explain a bit about BKNG, the online travel company changed its name from Priceline because they now have a much broader portfolio than just Priceline.com. Its Priceline.com segment is probably the most widely known, but BKNG also owns several other online travel brands: Booking.com, priceline.com, KAYAK, agoda.com, Rentalcars.com and OpenTable.
Over the last two decades, BKNG's business has expanded from just priceline.com, operating solely in the US, into six primary brands with headquarters around the globe, operating in more than 220 countries in over 40 languages. It may come as a bit of a surprise, but its largest brand is actually not Priceline.com. It's Booking.com, which is sort of like AirBNB, but it's a blend of both hotels and private apartments. Although hotels seem to be more prominent on the site.
Booking.com has more than 1.5 mln properties, averages over 1 mln bookings per day and produces a significant majority of BKNG's overall gross bookings and operating profit. The name change more accurately aligns its overall company name with its largest business.
Turning to the Q4 results, non-GAAP EPS rose 19% YoY to $16.86, well above prior guidance of $13.40-14.00. Revenue rose 19.4% year/year to $2.80 bln, which was above market expectations. Adjusted EBITDA is a key metric for BKNG and it grew by 23% YoY to $1.07 bln, well ahead of prior guidance of $870-910 mln. In terms of guidance for Q1, the company sees non-GAAP EPS (using a new revenue accounting standard) of $10.00-10.40 while adjusted EBITDA is expected in the $680-705 mln range.
During the Q&A portion of the call last night, BKNG was talking about how its Booking.com website uses a blend of hotels and private residences. The company says its listings are mostly for hotels, but it wants to build out its offerings of private residences, or alternative accommodations as the company calls them.
BKNG concedes that its alternative accommodations offerings are not as large as others (presumably AirBNB), however, it is making investments to growth that side of the business. Also, BKNG says its Booking.com site has some advantages over competitors (again they are presumably talking about AirBNB). BKNG says it provides a superior offering to customers because it shows both hotels and alternative accommodations on the same page.
So when a customer is searching for what they want, they see both right there. They see the reviews right there. They get to choose among whatever they want first. And along with not only choosing it, it's instantly bookable. That's a big thing for a lot of customers. With other services, you may go back and forth with the property owner via email and in the end they may not want to rent to you. Booking.com's alternative accommodations, on the other hand, are 100% instantly bookable. Another advantage is that Booking.com does not charge the travelers fees, which can be annoying. You think the price is one thing then all of a sudden you see there's this big service fee. Overall, Booking.com knows it's not as well-known as others like AirBNB, but it's working hard to become a leader in the alternative accommodations space.
Also, on the call, BKNG talked about how travel is a function of global GDP. As the world's economies do well, travel grows faster, and particularly when you have certain parts of the world where people could not afford to travel and things are going well there. As people are moving into the income level where they can travel, one of the first things they want to do is travel. That's an area where BKNG is currently spending time, energy and effort to make sure that BKNG is there as people are ready to travel. Overall, the travel market is in good shape.
In sum, this was a very good quarter for BKNG. They reported very nice upside for Q4. The stock is always a bit volatile around earnings. It sold off on earnings in Q2 and Q3 so it was nice to see a gap higher on Q4 results. On a final note, it will take time for people to get used to the new name, but it makes sense as the company has long grown beyond just Priceline.com.