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For Booking Holdings, the High-Growth Days Are Done

By Motley Fool Staff – May 15, 2019 at 12:39PM

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The Priceline parent is still expanding, but investors will need to scale back their expectations.

With a slew of travel websites including its flagship Booking.com, Priceline.com, and Kayak.com, not to mention businesses in adjacent spaces like OpenTable and Rentalcars.com, Booking Holdings (BKNG -2.13%) has a big share of mindspace in its niches. But the bigger a business gets, the harder it is to maintain its rate of expansion.

In this segment from Motley Fool Money, host Chris Hill and senior analyst Andy Cross talk about the company's market position, revenue, profits, financials and outlook.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.

This video was recorded on May 10, 2019.

Chris Hill: Booking Holdings' first-quarter profits and revenue came in a bit light, but shares of Priceline's parent company still up a bit on Friday despite that. You tell me, Andy, what'd you think of the quarter?

Andy Cross: Well, the hyper-growth days of booking.com, Priceline are over. It's OK, as long as investors understand that. Sales were up 6% if you back out the real strong dollar and the timing impact of Easter. Gross travel bookings up about 2%. That was down from up 14% of all of last year. The real high-growth days of booking.com and Priceline are down.

Interesting, they have 217 million worldwide rooms that were booked across their platform. That was up 10% ahead of their own guidance. And they now have almost 6 million alternative accommodations listed. That's up 13% as they go after the likes of Airbnb's market as well, too. Profits a little bit on the light side. It was a nice quarter, as long as you understand that the real heyday of high growth in booking.com and Priceline and their other businesses really isn't quite there. They bought back a lot of stock. They generate $4 [billion]-$5 billion of free cash flow per year. They're going to continue to buy back stock. It only sells at 16 or 17 times free cash flow. So, for a steady business, very profitable, it can be a nice investment in for investors, as long as you understand it's not going to be the huge growth story that it once was.

Hill: Although this does come in the same week where TripAdvisor shares sold off in the wake of their latest quarter. It does make me wonder if we're seeing a little bit of cooling off, not just with Priceline and booking.com, but maybe with travel in general.

Cross: Yeah, I think that might be true, Chris, when you just think about some of the wider macro concerns. You mentioned China at the top of the show. That just probably is playing a part. People are probably more careful with their dollars and how they spend it these days.

Andy Cross owns shares of Booking Holdings. Chris Hill has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Booking Holdings and TRIP. The Motley Fool has a disclosure policy.

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