Travel in the U.S. remains a thriving sector, with Booking Holdings showing impressive agility.
Airbnb (NASDAQ: ABNB) is undoubtedly a favourite among stock enthusiasts, and it’s clear why. With travel surging to the forefront of many American families’ interests and international vacations gaining traction — particularly in burgeoning economies with an expanding middle class — Airbnb’s long-term prospects shine brightly.
However, an overlooked contender might outpace it: The online travel behemoth Booking Holdings (NASDAQ: BKNG), which oversees brands like Booking.com, Priceline, Agoda, Rentalcars.com, and Kayak. Let’s delve into the details.
The Tortoise and the Hare: Which Comes Out Ahead?
Although Airbnb boasts widespread appeal, it might astonish many to learn that over the past year, Booking Holdings has eclipsed Airbnb’s performance.
A year ago, Airbnb was trading at a lofty valuation, reflecting projected years of steep growth. Conversely, Booking Holdings, often perceived as the “elder” online travel company with its origins tracing back before the dot-com era, had a more grounded valuation. But bigger doesn’t necessarily mean slower or less effective. Despite Airbnb experiencing significant revenue growth in recent years, Booking Holdings has witnessed a resurgence in its revenue growth, outperforming Airbnb in the past year. In Q2 2023, Booking reported a 27% annual revenue growth, compared to Airbnb’s 18%.
Both companies are renowned for their robust cash flows. Having pioneered a robust online accommodation booking model for many years, Booking continues to dominate. Their Q2 2023 net income stood at $1.3 billion, a 51% increase from 2022, continually identifying fresh avenues for profit. The per-share net income rose by 66%, further amplified by the company’s considerable stock buybacks. So far this year, the management repurchased stocks worth $5.25 billion, almost $3 billion more than the first half of 2022.
For context, Airbnb also flourished, marking a 72% annual surge in net income, yet there’s still ground to cover to rival Booking’s impressive operating profit margins.
Which Stock Promises More?
A few months prior, I had opined that Booking might be a more strategic acquisition than Airbnb in the present scenario. Booking’s current trading is 19 times its projected 2024 earnings, whereas Airbnb’s stands at 31 times.
However, both these valuations seem to command a premium, possibly more so for Booking. In a more extended timeframe (over five years), Airbnb may display more growth potential as it ventures beyond its foundational hosting services. Booking, on the other hand, boasts a diverse portfolio. With 2023 witnessing unparalleled U.S. travel, there are hints of Americans grappling with inflation, suggesting a potential growth deceleration in 2024.
Yet, a noteworthy mention from Booking’s recent earnings call highlighted that international room bookings only regained their 2019 pace in Q2 2023. While global travel expenditure might stabilize, the appetite for vacations globally remains promising.
In summary, while Booking isn’t a bargain stock and may encounter challenges, especially if travel appetite wanes, it still emerges as a compelling long-term travel stock option, perhaps more so than Airbnb at this juncture.
In the fast-paced world of stock trading, sometimes familiar brands like Airbnb capture the most attention. Yet, it’s essential to remember that older, established entities like Booking Holdings still have much to offer. Astute investors will look beyond the immediate limelight and consider the broader picture as the travel industry ebbs and flows with global events and market pressures. With its diverse portfolio and robust performance, Booking Holdings may be the overlooked gem in the vibrant mosaic of travel stocks.
