Online travel agency Booking Holdings (NASDAQ:BKNG) reported revenue ahead of Wall Street’s expectations in Q3 CY2024, with sales up 8.9% year on year to $7.99 billion. Its non-GAAP profit of $83.89 per share was also 8.4% above analysts’ consensus estimates.
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Booking (BKNG) Q3 CY2024 Highlights:
- Revenue: $7.99 billion vs analyst estimates of $7.63 billion (4.8% beat)
- Adjusted EPS: $83.89 vs analyst estimates of $77.38 (8.4% beat)
- EBITDA: $3.67 billion vs analyst estimates of $3.34 billion (9.6% beat)
- Operating Margin: 39.8%, down from 42.3% in the same quarter last year
- EBITDA Margin: 45.8%, up from 44.7% in the same quarter last year
- Free Cash Flow Margin: 28.7%, down from 40.6% in the previous quarter
- Room Nights Booked: 299 million, up 23 million year on year (beat)
- Market Capitalization: $148.4 billion
Company Overview
Formerly known as The Priceline Group, Booking Holdings (NASDAQ:BKNG) is the world’s largest online travel agency.
Online Travel
Because of the enormous number of flights, hotels, and accommodations available, travel is a natural fit for marketplaces that aggregate suppliers, simplifying the shopping process for consumers. Online travel platforms today make up over 50% of the industry’s bookings, a percentage that has been rising for 20 years, and will likely continue in the years ahead.
Sales Growth
Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Over the last three years, Booking grew its sales at an incredible 35.7% compounded annual growth rate. This is a great starting point for our analysis because it shows Booking’s offerings resonate with customers.
This quarter, Booking reported year-on-year revenue growth of 8.9%, and its $7.99 billion of revenue exceeded Wall Street’s estimates by 4.8%.
Looking ahead, sell-side analysts expect revenue to grow 5.6% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and indicates the market believes its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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Room Nights Booked
Booking Growth
As an online travel company, Booking generates revenue growth by increasing both the number of stays (or experiences) booked and the commission charged on those bookings.
Over the last two years, Booking’s room nights booked, a key performance metric for the company, increased by 16.9% annually to 299 million in the latest quarter. This growth rate is among the fastest of any consumer internet business and indicates its platform's popularity is exploding. 
In Q3, Booking added 23 million room nights booked, leading to 8.3% year-on-year growth. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t accelerating booking growth just yet.
Revenue Per Booking
Average revenue per booking (ARPB) is a critical metric to track for consumer internet businesses like Booking because it not only measures how much users book on its platform but also the commission that Booking can charge.
Booking’s ARPB growth has been mediocre over the last two years, averaging 4.6%. This isn’t great, but the increase in room nights booked is more relevant for assessing long-term business potential. We’ll monitor the situation closely; if Booking tries boosting ARPB by taking a more aggressive approach to monetization, it’s unclear whether bookings can continue growing at the current pace. 
This quarter, Booking’s ARPB clocked in at $26.74. It was flat year on year, worse than the change in its room nights booked.
Key Takeaways from Booking’s Q3 Results
We were impressed that Booking beat analysts’ revenue, EBITDA, and EPS expectations this quarter. We were also excited its room nights, an important volume metric, outperformed Wall Street’s estimates. Overall, we think this was still a solid quarter with some key areas of upside. The stock traded up 4% to $4,650 immediately following the results.
Booking put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
