Booking Holdings (BKNG) — with its strong travel-related brands — is the most profitable and largest online reservation service in the world, notes Ingrid Hendershot, a value-focused money manage and editor of Hendershot Investments.
Booking is available in 40 languages with more than 2.3 million properties in more than 220 countries, including 432,000 hotels, motels and resorts and 1.9 million homes, apartments and other unique places to stay.
Agoda is a leading online accommodation reservation service catering primarily to consumers in the Asia-Pacific region. Rentalcars is a multinational service, offering cars reservations in over 54,000 locations. Priceline offers savings on airline tickets, hotels, car rentals, vacation packages and cruises.
KAYAK, acquired in 2013, is a leading travel research site allowing people to easily compare hundreds of travel sites when searching for flights, hotels and rental cars. OpenTable, acquired in 2014, is a leading brand for booking online restaurant reservations. OpenTable primarily does business in the United States with plans to expand internationally.
The COVID-19 pandemic had a material adverse impact on Booking’s financial results last year; this prompted us to sell our position in Booking last year given all the uncertainty.
We continued to monitor the company’s efforts in navigating through the travel crisis. Booking Holdings reported better than expected booking growth in the 2021 second quarter as there were strong signs of recovery in the travel industry due to increased vaccination rates and the relaxation of many travel restrictions.
Revenues in the second quarter increased 243% to $2.2 billion. Second quarter gross bookings traveled 852% higher over the prior year to $21.9 billion. Room nights booked increased 461% to 157 million although the company still posted a loss related to COVID.
There is still uncertainty for the near-term, due to the Delta variant and potential future travel restrictions. However, management is very confident about the return of long-term growth for global travel.
We agree and have decided to book an early reservation by re-establishing a position in Booking Holdings with the expectation that the worst of the pandemic’s impact on the company is behind them.
Booking Holdings’ business is not capital intensive and thus generates very strong free cash flow. During the past five years, Booking Holdings has generated over $17 billion in free cash flow and has returned over $18 billion to shareholders via share repurchases.
Long-term investors should now consider this high-quality company with strong brands, strong cash flows and strong future growth. We rate the stock a buy.
