Booking Holdings (BKNG 1,983.76, +112.64, +6.02%), which recently changed its name and
ticker symbol from Priceline.com (PCLN), is trading sharply higher today after
reporting strong Q3 results. BKNG is an online travel company. Originally known
as Priceline, the company underwent a name and ticker change in February of
this year to better reflect the company’s much broadened portfolio. Its
Priceline.com segment probably remains the most widely known, but BKNG also
owns several other online travel brands, including current namesake and flagship
portal Booking.com, which generates a significant portion of the company’s
international results, as well as KAYAK,
agoda.com, Rentalcars.com, and OpenTable.
Turning to the Q3 results, non-GAAP EPS rose 7% year/year to $37.78, which was above prior guidance of $36.70-37.70. Revenue rose 9.4% year/year to $4.85 bln, which also was above prior guidance of $4.70-4.83 bln. Adjusted EBITDA is a key metric for BKNG, and it grew by 8% year/year to $2.36 bln, at the high end of prior guidance for $2.30-2.36 bln. In terms of guidance for Q4, the company sees non-GAAP EPS of $18.90-19.40 and revenue growth of +13-16%, which we compute as $3.17-3.25 bln. The guidance is above market expectations.
On the call, management talked about how it's beginning to ramp up brand advertising. The goal of this ramp is to bring more customers directly to BKNG's platforms and to increase product awareness, particularly in its home segment. BKNG also noted that it has expanded its product breadth and improved its customer experience in the areas of alternative accommodations and experiences. BKNG has been building supply in alternative accommodations to better take on rivals like AirBNB.
The Booking.com website connects users to 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, otherwise known as alternative accommodations. BKNG has said in the past that its alternative accommodations offerings are not as large as those of certain industry peers (presumably AirBNB), however, the company is investing in the growth of that side of its business.
However, while its portfolio of alternative accommodations may be slighter than those of peers, the Booking.com site’s ability to list both hotels and alternative accommodations on the same page may constitute a superior offering for customers than a platform that does not so readily enable comparison. This design may give Booking.com an advantage over competitors like AirBNB, which includes only alternative accommodations. A Booking.com customer in search of lodging sees both categories in their results and can easily consult reviews to find their first choice among various options.
Not only can customers do research and make choices on Booking.com’s platform, but on the site, those choices are instantly bookable, and this point of convenience is significant for a lot of customers. Other services may entail back-and-forth with a property owner via email, and in the end, the owner may not want to rent to you. Booking.com's alternative accommodations, on the other hand, are 100% instantly bookable. Another advantage when it comes to customer appeal is that Booking.com does not charge travelers’ fees. Overall, Booking.com knows that it is less well-known than others like AirBNB, but it's working hard to become a leader in the alternative accommodations space.
Overall, this was another very good quarter for BKNG. The company reported decent upside for Q3 and upside Q4 guidance. The stock is always a bit volatile around earnings and has a history of making big moves around results time. From a broader perspective, the company continues to focus on the positioning and share of its largest brand, Booking.com, in the interest of enabling it to competitively list both hotels and accommodations from the rising private apartments rental category. The stock has been trending lower in recent months, but perhaps this report can help it to get back on a sustained uptrend.
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