The second quarter earnings season is fully underway. Despite a larger-than-expected EPS decline (-7.3% vs -7.0%) for the S&P 500 , U.S. stocks are still grinding higher on expectations the Federal Reserve will manage to navigate a soft landing.
When it comes to the online travel sector, the Q2 earnings season will start later this week when the number of companies, including Booking (NASDAQ: BKNG ) and Airbnb (NASDAQ: ABNB ), are expected to report.
“We believe overall online travel demand remains healthy thus far in 2023. However, 2Q comps are tough and growth will slow down, with BKNG’s room nights growth decelerating from +38% Y/Y in 1Q to JPMe 6% in 2Q, ABNB’s N&E booked from +19% in 1Q to +JPMe 12% in 2Q (though expectations are higher), and EXPE’s booked room nights from +23% in 1Q to JPMe +10% in 2Q,” JPMorgan analysts said in a client note.
The analysts highlighted Booking as the best stock to own in this universe, despite the year-to-date rally that pushed share price above JPM’s price target of $3,000 per share.
“We believe BKNG is preferred due to its solid margins and FCF generation, long track record of execution, and investor-friendly capital allocation, incl. substantial share buybacks, all of which make BKNG more attractive in a slower macro environment. However, there are some concerns around the potential for higher ADRs and health of the consumer affecting travel spend,” analysts said.
Similarly, Oppenheimer analysts said they expect Booking to report Q2 nights above its guidance.
“Main investor pushback is potential travel slowdown, but we see trends remaining healthy into ’24,” they wrote in a note.
Analysts boosted the price target on BKNG stock by $500 to $3500 per share. Similarly, Mizuho analysts also hiked their price target on BKNG shares heading into earnings.
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