Jefferies downgrades Booking Holdings, cites slower growth

Investing.com -- Jefferies in a note dated Wednesday downgraded Booking Holdings (NASDAQ: BKNG) to “hold” from “buy”, reflecting a revised outlook driven by concerns over slowing room night growth and increasing market risks.

This comes amidst broader industry trends and competitive pressures that are shaping the online travel sector.

The downgrade stems from Jefferies’ assessment of a deceleration in global room night growth.

As per Jefferies’ analysis, worldwide growth, excluding China, is projected to slow down from 11.0% in 2023 and 6.1% in 2024 to 4.5% in 2025 and 3.6% in 2026.

“The slowdown is primarily driven by a normalization of demand trends, now that worldwide Room Nights have reached pre-pandemic levels,” said analysts from Jefferies in a note.

Additionally, the expansion of online penetration, which saw nearly 25% growth between 2019 and 2024, is expected to moderate, further impacting overall growth rates.

Jefferies’ examination of end-market dynamics flag that Booking Holdings will face slower growth in its target markets.

“We estimate BKNG's end-markets will experience 4.4%/3.3% growth in '25/'26, which is a slowdown from 10.9%/6.1% in '23/'24 when reported Room Nights outperformed end-market growth by 620/70 bps,” the analysts said.

This deceleration is indicative of broader market trends and intensified competition, which could weigh on BKNG’s performance.

The potential for additional downside is in Jefferies' updated outlook. Their revised forecasts indicate that Booking Holdings’ room night growth is expected to underperform consensus estimates, with anticipated deficits of 0.9% in 2025 and 3.3% in 2026.

This projection stands in contrast to the prevailing consensus, which expects a modest acceleration in room night growth.

Concerns about Booking Holdings future growth are further compounded by the potential for a reversal in the currently high booking window and the growing competition from alternative accommodations.

In light of these risks, Jefferies has lowered its price target for Booking Holdings to $4,200, down from the earlier target of $4,350. This revised target corresponds to a 20x multiple on the 2025 price-to-earnings ratio, which matches BKNG’s 10-year average valuation excluding the COVID-19 period.

The adjustment reflects anticipated downside risks and competitive pressures that could affect BKNG’s profitability and growth prospects.

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