Booking (BKNG) Upgraded to a 'Buy' at Jefferies as Travel Expected to Rebound in 2H2021

April 13, 2021 8:59 AM EDT
Get Alerts BKNG Hot Sheet
Price: $2,327.08 +2.09%

Rating Summary:
    24 Buy, 26 Hold, 3 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 38 | Down: 18 | New: 7
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Jefferies analyst Brent Thill upgraded Booking (NASDAQ: BKNG) to a “Buy” from “Hold” and raised the price target to $2,800 from $2,300 as the travel industry is expected to bounce in the second half of the year.

Thill highlights four reasons behind the rating upgrade:

1) a meaningful inflection in global travel after a tough year; 2) bookings and revenue growth reaccelerating; 3) margins rebounding from pandemic levels (with potential upside from cost-cutting initiatives), and 4) relatively cheap stock that has underperformed other travel names.

More and more signs are pointing towards a pent-up demand forming with the data from the latest proprietary survey indicating a strong rebound in travel.

“High-frequency data we track, including city congestion, flight activity, and travel website traffic, show steady recovery from the 2Q20 bottom. We highlight that TSA traffic is down ~39% vs. 2019 (compared to -95% in Apr'20), traffic to major travel websites (a proxy for future bookings) is down ~48% vs. 2019 (compared to -85% in Apr'20), and domestic flight activity is down ~28% (compared to ~76% in Apr'20),” Thill said in a note sent to clients.

“We recognize the elevated level of uncertainty around COVID-19 and the fact that the primary push-back on the name is that 85-90% of bookings and revenue come from outside the US, and the majority of that from markets where infection numbers are still growing and lockdowns are in place. However, we think those concerns will lift by 2H21 as the rest of the world catches up with the US on vaccination levels and global travel rebounds.”

Another reason behind the stock upgrade is a “relatively” cheap stock, which trades at ~15.5x FY23 Street EBITDA estimates vs. a 14.6x 10-year average.

“We believe it is important for investors to consider relative valuation, as BKNG currently trades at ~12% premium to NASDAQ, or 1SD below the historical 36% premium. Given current expectations for a rebound in global travel, we believe BKNG deserves to trade at a higher premium to reflect the full upside from pent-up demand. Our $2,800 PT implies a 15.5x multiple on our FY23 EBITDA estimate and is largely in line with the historical average,” Thill adds.

The analyst also raised the price targets on the Hold-rated Expedia Group (NASDAQ: EXPE) to $175.00 per share from $145.00, as well as TripAdvisor (NASDAQ: TRIP) - rated “Underperform” - to $29.00 from $24.00.



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