The RiverPark Large Growth Fund recently published its Q1 investor letter, discussing its quarterly performance and investment thesis on Booking Holdings Inc (NASDAQ: BKNG), Adobe Systems, and Amazon.com and other companies. We’ve already covered the fund’s viewpoint about Adobe and Amazon. In this article, we’re going to take a look at RiverPark’s commentary on Booking Holdings, formerly known as Priceline Group.
Here is what RiverPark thinks about the company:
Booking (formerly Priceline) shares advanced 20% for the quarter as the company reported strong fourth quarter earnings results well ahead of expectations. For the fourth quarter, worldwide accommodation reservations were up 17% year-over-year, exceeding the high-end of guidance, gross bookings increased 19% year-over-year, gross profit was up 22% year-over-year, and EBITDA increased 23% year-over-year to $1.1 billion. These results capped a strong year in which room nights grew by 21%, and, despite significant investments in marketing, product development and market expansion during the year, EBITDA grew by 18%, and non-GAAP EPS by 17%. These results were substantially ahead of the cautious guidance the company had given following its 3Q17 report (which prompted a sell-off in the shares last fall).
The company has been a dominant on-line travel agency for over a decade while posting highteens revenue growth, becoming one of the world’s largest accommodation platforms, adding more than 470,000 properties last year, and ending the year with 1,600,000 traditional properties (hotels, motels and resorts). The company also grew its alternative accommodations (homes, apartments, and other unique places to stay) to 1,200,000. With a business model that requires limited capital expenditures ($288 million as compared with its $12.7 billion of revenue for 2017), BKNG has historically produced very impressive free cash flow, generating more than $4.3 billion in 2017. This cash flow has been used for episodic acquisitions as well as to return cash to shareholders (the company repurchased $1.8 billion of shares in 2017, has a $10 billion buyback authorization remaining, representing about 10% of BKNG’s current market capitalization, and still has almost $18 billion of cash on its balance sheet).
Given its impressive history of growth and consistency, we continue to find the company’s forward earnings valuation of 20x 2019 earnings to be attractive. We added to our position during the quarter and BKNG is a top 10 holding in the portfolio.
Booking Holdings Inc (NASDAQ: BKNG) provides online travel and related services to consumers and local partners in more than 220 countries. Its six primary brands include Booking.com, Priceline.com, Agoda.com, Kayak.com, Cheapflights, Rentalcars.com, Momondo, and OpenTable.
Shares of Booking Holdings has been performing well over recent months. BKNG has jumped nearly 10% over the past three months. While the stock has gained around 13% over the past 12 months. Since the start of 2018, the company’s share price has moved up 15.78%. The stock has a consensus average recommendation of Overweight and a consensus average target price of $2,289, according to analysts polled by FactSet. On Friday, BKNG was closed 1.09% down at $2,066.