Jefferies Downgrades Booking Holdings on Slower Growth Outlook
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Jefferies Revises Outlook on Booking Holdings
Jefferies has recently adjusted its position on Booking Holdings (NASDAQ: BKNG) by downgrading the stock from 'buy' to 'hold'. This decision is based on their evaluation of a deceleration in room night growth as various factors influence the online travel industry.
Industry Trends Impacting Growth
The downgrade reflects broader industry trends and competitive pressures that are currently reshaping the landscape of online travel services. Jefferies highlights that the increase in global room night growth, notably outside of China, is expected to slow significantly. Projections indicate a decrease from 11.0% in 2023 and 6.1% in 2024 to only 4.5% in 2025 and 3.6% in 2026.
Jefferies' Analysis on Growth Expectations
Analysts from Jefferies emphasize that the slowdown in demand trends appears to coincide with a return to pre-pandemic levels of room nights. This normalization of demand has created a notable shift in the market dynamics. Furthermore, the pace of online penetration, which surged nearly 25% between 2019 and 2024, is anticipated to moderate, affecting overall growth expectations.
Projected Growth Rates
According to Jefferies, anticipated growth for Booking Holdings in its key markets is projected to be 4.4% in 2025 and 3.3% in 2026, compared to a more robust 10.9% and 6.1% in 2023 and 2024, respectively. The analysts note that remarking Room Nights for Booking Holdings have previously outperformed market growth.
Future Challenges Ahead
This deceleration not only depicts broader market challenges but also points to increased competition that may heavily influence the performance of BKNG. Jefferies' latest projections suggest that Booking Holdings' growth may lag behind consensus estimates, indicating deficits of 0.9% in 2025 and 3.3% in 2026.
Revised Price Target for Booking Holdings
Compounding concerns regarding future growth prospects, Jefferies has revised its price target for Booking Holdings to $4,200, a decrease from the previous target of $4,350. This new target translates to a 20x multiple based on the projected price-to-earnings ratio for 2025, which mirrors BKNG’s average valuation over the past decade, excluding the COVID-19 disruption.
The adjustment reflects the ongoing market challenges and competitive pressures that could limit BKNG’s profitability and future growth. Investors and stakeholders should be mindful of these changes as they navigate the evolving landscape of the online travel sector.
Frequently Asked Questions
What led to Jefferies' downgrade of Booking Holdings?
Jefferies downgraded Booking Holdings due to concerns over slowing room night growth and increasing competition in the online travel sector.
What are the new growth projections for Booking Holdings?
Jefferies projects growth for Booking Holdings to slow to 4.4% in 2025 and 3.3% in 2026, down from previous figures.
What is the updated price target for Booking Holdings?
The revised price target for Booking Holdings is now $4,200, decreased from an earlier target of $4,350.
How does the growth rate compare to past performance?
The projected growth rates indicate a slowdown compared to 10.9% and 6.1% recorded growth in 2023 and 2024 respectively.
What are the risks affecting Booking Holdings' future performance?
Risks include market normalization post-pandemic and heightened competition from alternative accommodations, potentially impacting profitability.
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