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Booking Rises as Street Calls Earnings Beat a `Welcome Surprise'

Catherine Larkin

(Bloomberg) -- Booking Holdings Inc.’s better-than-expected earnings drew positive commentary on Wall Street and suggested that the online travel company may finally be back on track.

The shares rose as much as 6.8% Thursday, their biggest intraday gain in almost three months. Analysts called the results “better than feared” and a “welcome surprise” after disappointments in previous quarters. At the same time, the company’s forecast for room night growth in the third quarter missed estimates and sparked some concerns about slowing growth.

Here’s what Wall Street is saying:

Wedbush, James Hardiman

The results were a “welcome surprise” after the fourth quarter “spooked investors with regards to the European outlook” and first-quarter earnings “did little to alleviate these concerns.”

Now, Booking “seems to be back to its standard of comfortably exceeding quarterly expectations and providing a quarterly guidance that, while certainly not blowing away Street estimates, does encompass the consensus.”

Neutral, price target raised to $1,950 from $1,850.

Benchmark, Daniel L. Kurnos

The shares should see a relief rally on the back of solid results, especially 12% room-night growth that exceed analyst estimates of 9%. However, the third-quarter forecast calls for only 6%-8% room-night growth as Booking continues to pull back on spending.

“There may be intrinsic value in the shares but the balance between investors’ need for growth and holding margins flattish to maintain the Company’s premium valuation feels tenuous at best.” Benchmark has a holding rating on the stock.

Morgan Stanley, Brian Nowak

Buybacks helped drive the earnings per share beat in the second quarter and, along with Booking’s forecast, “continue to reaffirm our view that we are entering a period of slower growth and smaller EPS beats.”

The company will need more growth in alternative accommodations and/or more penetration in the U.S. market to maintain double-digit room-night growth. Challenges in U.S. brand marketing make it difficult to see this as the “base case” scenario.

“Valuation isn’t stretched relative to many consumer sectors but we would rather deploy incremental capital in FB/GOOGL at these levels given the growth/valuation relationship and more durable longterm growth.”

Morgan Stanley has an equal-weight rating on Booking and raised its price target to $2,100 from $2,050.

Susquehanna, Shyam Patil

The results were “much better than feared.” While the third-quarter room nights outlook came in below the average analyst estimate, Booking tends to beat its guidance. The company also “remains somewhat cautious around the EU travel macro” environment.

Susquehanna has a positive rating on the stock and raised its price target to $2,250 from $2,100.

What Bloomberg Intelligence Says

“Similar to the last quarter, Booking Holdings’ room-night growth view for 3Q looks conservative given strong 2Q results at 500 bps above the midpoint of company guidance. We believe Booking’s expanding supply in alternative accommodations will remain a tailwind for room-night growth in 2H.”-- Mandeep Singh and Andrew Eisenson, tech analysts-- Click here for the research

To contact the reporter on this story: Catherine Larkin in Chicago at clarkin4@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Jennifer Bissell-Linsk

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