Deutsche Bank: What To Expect From Online Travel Agency Earnings

Deutsche Bank previewed the quarterly reports due from online travel agencies this week, including Booking Holdings Inc BKNG and Tripadvisor Inc TRIP.

The Analyst

Deutsche Bank's Lloyd Walmsley maintains a Hold rating on Booking Holdings with a price target lifted from $2,100 to $2,175. The analyst maintains a Hold rating on TripAdvisor with a price target lifted from $38 to $41.

Booking Holdings: May 9

Booking should show "solid" volume growth in its first-quarter report amid easing comps and "healthy leverage" in performance advertising spend, as management continues to focus more on brand spend and direct traffic, Walmsley said in a note. (See the analyst's track record here.)

The company should show improved margins in the quarter, as third-party data points to success in trimming higher-cost channels, the analyst said. 

Booking's stock remains a "core grind-higher holding," but a neutral stance is justified with the stock trading near the analyst's price target, he said. 

TripAdvisor: May 8

Investors should hold a "cautious" stance on TripAdvisor, as data from Booking.com shows a continued shift away from metasearch channels like TripAdvisor, Walmsley said. Investors do have reason to be "increasingly optimistic" that the company can stabilize its core ad business with new TripAds sponsored placement ad units, the analyst said. 

TripAds could potentially generate $100 million to $300 million in long-term revenue at high incremental margins and add $19 per share to TripAdvisor's stock in a "blue-sky scenario," Walmsley said. But it will take time for the OTA's management to build out the initiative, and a notable revenue ramp isn't expected in the immediate term, the analyst said. 

Price Action

Shares of Booking Holdings were down 1.46 percent before the close Tuesday, while shares of Tripadvisor were down more than 1 percent. 

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