Citi, JPMorgan Downgrade Booking Holdings On Lower Growth Projections

Shares of online travel agency Booking Holdings, Inc. BKNG dropped after the company's second-quarter print Thursday. 

The Analysts

Citi analyst Mark May downgraded Booking Holdings from Buy to Neutral and lowered the price target from $2,350 to $2,150.

JPMorgan analyst Doug Anmuth downgraded Booking Holdings from Overweight to Neutral and lowered the price target from $2,385 to $2,070.

The Thesis

Booking Holdings reported strong results relative to guidance, with above-forecast revenue and adjusted EBITDA, said Citi's May. Yet second-quarter room night growth and third-quarter guidance were below expectations, the analyst said. 

“While posting solid 2Q EBITDA results, decelerating top-line growth again results in a downward revision in our future growth rate assumptions and earning forecasts. We believe the near-term growth rate may not provide support for enough upside to justify a Buy rating at these levels,” May said.

JPMorgan's Anmuth said Booking Holdings' Q3 guidance reflects results that were pressured by the World Cup and unusual weather patterns.

The firm is modeling 10-percent growth for room nights booked and FXN bookings in Q3 — a decrease from the mid-teens, the analyst said.

BKNG demonstrated strong Q2 profit upside that was driven by marketing efficiency, Anmuth said. 

“The company remained disciplined on its brand spend in 1H, and the ramp in brand spend did not happen as fast as it had hoped. Despite the slow ramp in brand spend, direct channel, defined as users coming through non-paid channels, is one of BKNG’s fastest-growing channels and a significant source of new users." 

Price Action

BKNG shares were trading down 1.76 percent to $1,908.12 at the time of publication Friday. 

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