Owner of online booking websites such as booking.com, agoda, priceline, and kayak, Booking Holdings’ stock (NASDAQ: BKNG) fell nearly 10% in the last 5 trading days. Why? The reason is simple – the demand expectations within the travel and hospitality industry are re-adjusting in the wake of a new wave of infections in Europe and cruise operators and airlines vying for more financial support. So what does this mean for investors? Our analysis indicates that Booking Holdings could be a risky bet in the near term. However, long-term gains are likely.
Our AI engine analyzes past patterns in stock movements to predict near term behavior for a given level of movement in the recent period, and suggests nearly a 41% probability of Booking Holdings Inc. dropping another 5% over the next 21 trading days. Compared to this, the chances of a 5% rebound are 39%, indicating nearly the same likelihood of movement in both directions. This makes it a difficult stock to place a bet on. However, things become slightly more clear if we look at a 3 month timeframe – the chances of a 10% rebound increase to a significant 49%, and become meaningfully higher than the chances of a -10% fall, which decrease to 36%. Our detailed dashboard highlights the chances of Booking Holdings Inc.’ stock rising after a fall and should help you understand near-term return probabilities for different levels of movements.
In addition, looking at the underlying fundamentals, it is clear that demand weakness may keep a stock rebound in check. The long-term picture will be different as we expect strong gains over the next 2 years as travel resumes and demand rebounds. Our dashboard Big Movers: Booking Holdings Inc. Moved -9.6% – What Next? lays this out.
Booking Holdings Inc.’s stock price decreased -9.6% last week. In comparison, the stock has increased 18% between 2017 and 2019, and has decreased -4% between 2017 and now. Except for the jump in 2019, the company’s stock has effectively not moved much in the past few years. This usually happens when there are growth concerns. Is this the case with Booking Holdings? It doesn’t look so. Booking Holdings’ revenue has increased 18.8% from $12,681 Mil in 2017 to $15,066 Mil in 2019, while net margins have increased from 18.5% to 32.3% during the same time period. This doesn’t sound like a stock that shouldn’t be rewarded by the market! The last 12 months have been different with revenue falling -25% over the 2019 figure to $11,297 Mil, and margin declining to a still healthy 22.5%. Overall, this year will see a sharp decline in revenue, but we expect a sharp rebound next year. Although 2021 revenue is likely to remain below the pre-Covid level.
Taking both perspectives together, it appears that in the near term, Booking Holdings may not give much return and could continue to be a risky stock. But there are better investment options you can look at – such as this high quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.