Market Overview

Booking Holdings' Shift To A Merchant Model Leads To Upgrade

Share:
Booking Holdings' Shift To A Merchant Model Leads To Upgrade
Related
Benzinga's Top Upgrades, Downgrades For January 9, 2019
A Peek Into The Markets: US Stock Futures Gain, Crude Oil Up Over 2%

Booking Holdings Inc (NASDAQ: BKNG) shift to a merchant model may be offering a favorable entry point, according to a new analyst note.

The Analyst

Wells Fargo analyst Robert Coolbrith upgraded Booking Holdings to Outperform and raised his price target from $2,000 to $2,150.

The Thesis

Earlier in November, Booking Holdings reported third-quarter earnings that fell short of analysts estimates, but several factors have Coolbrith encouraged about the stock moving forward.

Management’s articulation of 2019 guidance and long-term strategy that include platform investment, above-market top-line growth and tolerance of modest EBITDA margin deliverage led the analyst to be be constructive on the stock.

“With a muted post-print stock reaction - while BKNG shares initially reacted positively, shares are down 1% since the print, vs. the S&P 500 flat over the same timeframe - we note that shares remain significantly below historical valuation averages,” said Coolbrith.

In the third quarter, Bookings Holdings said its merchant hotel revenue jumped 53.4 percent but agency revenue grew less than 1 percent. The merchant hotel revenue growth coincides with the rollout of a new global payments platform that enables consumers and hotels to pay and make payments through more diverse systems, including Alibaba Group Holding Ltd (NYSE: BABA)'s Alipay and GrabPay.

The shift to the merchant model means the company only remits cash to the hotel at the time of the stay, allowing the company to hold onto cash for several mostly, mostly for free, said Seth Borko, senior research analyst for Skift Research.

Coolbrith said the shift to a merchant model is a potentially underappreciated tailwind for working capital dynamics and FCF growth moving forward.

Price Action

Shares are trading down around the $1,846 level.

Related Links:

Booking Holdings CEO Has Some Winning Travel Tips For Summer Vacation

Booking Holdings Is Playing Catch-Up In Online Travel Growth Areas, Analyst Says In Downgrade

Latest Ratings for BKNG

DateFirmActionFromTo
Jan 2019JefferiesDowngradesBuyHold
Jan 2019Morgan StanleyDowngradesOverweightEqual-Weight
Nov 2018Wells FargoUpgradesMarket PerformOutperform

View More Analyst Ratings for BKNG
View the Latest Analyst Ratings

Posted-In: Robert Coolbrith Seth BorkoAnalyst Color Upgrades Price Target Travel Analyst Ratings General Best of Benzinga

 

Related Articles (BABA + BKNG)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
MDRXKeyBancUpgrades0.0
ANETNomuraUpgrades260.0
CNPRBC CapitalUpgrades34.0
FISVOppenheimerUpgrades88.0
FNDUBSUpgrades37.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

MKM Says Intel Offers 'Defensive Value'

Medtronic's Q2 Earnings Preview