Story Stocks^®

Booking Holdings (BKNG +0.8%) is trading roughly flat despite the online travel reservation giant reporting big upside with its Q1 report last night. Both revenue and adjusted EBITDA exceeded the high end of prior guidance. BKNG also guided to in-line revs for Q2. Despite the impressive results, we think some metrics and cautious commentary on the call are offsetting the strong results to some degree.

• In terms of Q1 metrics, room nights grew 7.2% yr/yr to 319 mln. This was BKNG's first quarter to exceed the 300 mln market, so that was an important milestone. This also slightly exceeded the high end of prior guidance. However, the 7.2% growth was below yr/yr growth in Q3 (+8.1%) and Q4 (+13.2%). It was a similar story with rental car days. Airline tickets saw growth of 44.8% to 16 mln units, which was down from Q4 on a yr/yr basis.
• While BKNG was encouraged by its Q1 results and the relative stability of trends seen thus far in Q2, the company recognizes the current geopolitical/macro uncertainty. There are concerns about the strength of consumer demand. However, BKNG believes its global diversification positions it well to navigate potential changes. BKNG remains confident in the long-term outlook for the travel industry.
• BKNG has observed notable changes in certain travel patterns. For example, it saw a moderation in trends for inbound travel into the US, particularly from bookers in Canada and to a lesser extent from Europe. However, it did see an improvement in trends in other travel corridors resulting in stable growth overall.
• Also, while it saw a yr/yr increase in length of stay on a global basis, it saw a decrease in length of stay in the US which could indicate that US consumers are becoming more careful with their spending. Looking ahead to Q2, BKNG continues to see stable travel demand trends but that could change.

Overall, BKNG's business seems to be holding up in the near term, but BKNG sounded cautious that view could change. This caution is weighing on other travel stocks: ABNB -4.5%, EXPE -3.6%.