TRIP - Booking stock just hit a 52-week low over inflation and recession fears. Should you buy the dip?

Shares of Booking Holdings ( NASDAQ: BKNG ) hit a 52-week low on Thursday, fueled by investor fears that this year’s summer travel season might turn out to be a bust -- even after the company issued a sunny forecast headed into the typically strong seasonal period.

The overall travel segment has sold off recently as investors have been increasingly worried that macroeconomic factors will end up raining on the sector's summer parade. With the recent slide and a post-pandemic summer in view, is now the time to buy BKNG?

Will Summer Travel Hold Up?

Specializing in online booking services for hotels, restaurants and flights, Booking ( BKNG ) has emerged as a bellwether stock in the online travel agency, or OTA, sector. In addition to its flagship site Booking.com, the company also owns such well-known consumer-facing sites as Priceline, Agoda, Cheapflights, Rentalcars.com, KAYAK and OpenTable.

While Booking shares have slid 21% over the past 30 days, the decline has been largely in line with its OTA peers. Expedia ( EXPE ) has tumbled 26%, TripAdvisor ( TRIP ) has fallen 29% and Airbnb ( ABNB ) has dropped 25%. Trip.com ( TCOM ) has been the outlier, with shares rallying 25%.

In comparison, the S&P 500 has retreated 8% during that time period.

Booking shares hit a 52-week low on June 30 of $1,703.05. That’s a 37% drop from its high of $2,715.66, reached on Feb. 16. The recent slide in travel stocks have come amid worries that inflation will cut into consumer spending and higher interest rates will undermine economic growth.

The decline has occurred despite Booking releasing a better-than-expected Q1 earnings report on May 4. While it posted a widened quarterly loss, the travel company also reported that revenue had shot up 137% year-over-year to $2.7B, topping analyst estimates by $170M.

The company also offered a fairly rosy near-term outlook for the travel sector, which has been on the rebound following the devastating lockdowns and social distancing restrictions put in place at the height of the pandemic.

"I am pleased to report a record $27 billion in gross bookings in the first quarter, the highest quarterly amount in our company’s history," said Booking Chief Executive Officer Glenn Fogel, in a statement.

Fogel added: “Despite an uncertain macroeconomic environment, we have seen continued strengthening of global travel trends so far in the second quarter of 2022, and we are preparing for a busy summer travel season ahead.”

Is BKNG a Buy?

Wall Street analysts, on average, rate Booking as a Buy. Of the 36 analysts tracked by Seeking Alpha, 17 rated the stock as a Strong Buy, while six others gave the stock a Buy opinion. SA authors also rated it a buy.

Not everyone has a bullish view, however. Twelve members of the Wall Street community have issued a Hold rating and one has deemed the stock a Sell.

Looking at quantitative measures, Seeking Alpha's Quant Rating system agrees with the more skeptical group of analysts. The stock gets an overall Hold rating.

On the positive side, the company earned an A+ for growth and profitability, an A- for revisions and a B for momentum. However, valuation represented a key sticking point for the Quant Ratings. BKNG received a D- for this crucial measure, as of July 1.

In a note dated June 24, BTIG analysts said tracking data showed weakening traffic for OTAs like Booking in June, which could be a sign that “macro pressures are beginning to weigh on travel behavior.” Despite the deceleration, they still saw the company on track to meet or beat consensus estimates for Q2.

“This should be a strong summer travel season in terms of revenue and EBIDTA for the online travel agencies, but we worry that macro pressure could weigh on bookings for stays in future periods,” added the analysts, who had a Neutral rating on the stock.

Truist Securities analysts, who rated Booking as a Buy, said in their June 3 note that they were concerned inflation would curb enthusiasm for travel if it persists.

“While we believe pent-up demand and high savings will likely continue to drive strong demand near-term, we’re lowering our 2023 expectations to reflect some impact to next year’s growth,” they said.

JMP analysts, who rated the stock market outperform, said in a note on June 21 that they view Booking as “best positioned to benefit from a resurgence in demand” in the sector.

“BKNG’s geographic exposure and market share gains against competitors should leave it better positioned to navigate a tough macro backdrop,” they said. “The main risk to our thesis is consumer confidence weakening, adversely impacting intent to travel.”

For a more in-depth look at Booking, check out SA contributor Albert Lin’s “Booking Holdings: Recovery Well Understood, Hold” or SA contributor Karreta Advisors’ “Booking Holdings: Leisure Travel at Risk from Cost of Living Crisis”.

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