Booking Holdings Inc. (BKNG) provides online travel and restaurant reservations and associated services. The company offers its services through six consumer-facing brands: Booking.com, Priceline.com, Agoda.com, Rentalcars.com, KAYAK, and OpenTable, Inc. (OpenTable).

The company’s shares are down 24.6% year-to-date and 20.1% over the past month to close yesterday’s trading session at $1810.33.

However, in terms of forward Price/Sales, the stock is currently trading at 4.28x, 426.8% higher than the industry average of 0.81x. Also, its forward EV/Sales of 4.28x is 308.1% higher than the industry average of 1.05x. Moreover, BKNG’s forward Price/Book of 12.44x is 455.2% higher than the industry average of 2.24x.

While the firm has made noteworthy improvements to compete with smaller, up-and-coming competitors, it being a consumer discretionary stock, could suffer more than the broader market in the near term as many analysts expect the economy to witness recessionary pressure.

Here’s what could shape BKNG’s performance in the near term:

Business Headwinds

The travel industry has significantly recovered from the pandemic blues. However, a faltering economy and the reinstatement of COVID-19 limitations might impact hard on travel reservations again in the autumn season. Following a better-than-expected quarter, the market may be overestimating the global travel recovery’s durability.

Mixed financials

During the first quarter, which ended March 31, 2021, BKNG’s total revenue increased 136.2% year-over-year to $2.69 billion. Its operating income came in at $174 million, compared to an operating loss of $311 million in the prior-year period.

However, its net loss grew 1173.7% from the prior-year quarter to $700 million. Its loss per share increased 1176.1% from the year-ago value to $17.10. In addition, its cash and cash equivalents declined 5.2% for the three months ended March 31, 2022, to $10.55 billion.

Mixed Profitability

BKNG’s trailing-12-month gross profit margin of 82.2% is 126.9% higher than the industry average of 36.3%. Its trailing-12-month EBITDA margin is 28.6% and 135.9% higher than its industry average of 12.1%.

However, its trailing-12-month net income margin, asset turnover ratio, and ROE are 35%, 47.1%, and 33.1% lower than their respective industry averages.

POWR Ratings Reflect Uncertainty

BKNG has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. BKNG has a D grade for Stability. The stock beta of 1.18 is consistent with the Stability grade.

Of the 65 stocks in the F-rated Internet industry, BKNG is ranked #8.

Beyond what I’ve stated above, you can view BKNG ratings for Growth, Value, Quality Momentum, and Sentiment here.

Bottom Line

While BKNG has witnessed enormous demand due to a rebound in travel activities this year, current macroeconomic headwinds like rising inflation and investors’ concerns over a potential recession could mar its growth.

Also, the stock is currently trading below its 50-day and 200-day moving averages of $2116.23 and $2290.46, respectively, indicating a downtrend. So, we think investors should wait before scooping up its shares.

How Does Booking Holdings Inc. (BKNG) Stack Up Against its Peers?

While BKNG has an overall C rating, one might want to consider its industry peer, Yelp Inc. (YELP), which has an overall A (Strong Buy) rating, and trivago N.V. (TRVG), and Travelzoo (TZOO), which have an overall B (Buy) rating.

BKNG shares were unchanged in premarket trading Thursday. Year-to-date, BKNG has declined -24.55%, versus a -20.38% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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