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Guggenheim Revisits Booking Holdings After Closing Hotelscombined Acquisition

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Guggenheim Revisits Booking Holdings After Closing Hotelscombined Acquisition
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Online travel agency Booking Holdings Inc (NASDAQ: BKNG) finalized and closed its acquisition of hotel metasearch site HotelsCombined, which prompted Guggenheim to revisit its thesis on the stock.

The Analyst

Guggenheim Partners' Jake Fuller maintains a Neutral rating on Booking Holdings with no assigned price target.

The Thesis

Booking Holdings' terms for acquiring Hotelscombined weren't disclosed and among the few publicly available reports is from Skift, which Fuller said suggests the metasearch business accounted for $2 billion in hotel bookings last year. Assuming a take rate of around 3 percent, the $2 billion in bookings would generate $60 million in revenue for the company.

From a strategic point of view, the analyst said Booking Holdings now boasts a "fairly large, if under-the-radar" metasearch platform. Assuming the $60 million in revenue contribution from Hotelscombined with expectations of $175 million for Momondo and $475 million for Kayak, the metasearch business could show a pro forma revenue of $710 million. This should be sufficient for Booking Holdings to become the second largest in metasearch assuming a mid-teens pro forma growth rate versus its peers that are showing a low single-digit growth rate.

Booking Holdings stock is trading at just 18 times estimated 2019 EPS, which is below its historical range of 20 to 25 times. A high-teens multiple is "reasonable" amid three concerns:

  • Softening industry trends that could impact estimates.
  • Growing competition, especially in Europe and within alternative accommodation categories.
  • Evolution of challenges like rate parity or direct booking efforts by hotel chains themselves.

Price Action

Shares of Booking Holdings traded up 1.8 percent Tuesday afternoon to $1,856.12.

Related Links:

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Booking Holdings Must Choose Growth Or Value Path, Says CNBC's Cramer

Latest Ratings for BKNG

DateFirmActionFromTo
Feb 2019Deutsche BankUpgradesHoldBuy
Jan 2019JefferiesDowngradesBuyHold
Jan 2019Morgan StanleyDowngradesOverweightEqual-Weight

View More Analyst Ratings for BKNG
View the Latest Analyst Ratings

Posted-In: Guggenheim Partners hotels Jake Fuller Online TravelAnalyst Color Travel Analyst Ratings General Best of Benzinga

 

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