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Why Booking Holdings Stock Fell 11% in January

By Jeremy Bowman - Feb 9, 2020 at 10:26PM

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Shares of the online travel giant slipped on coronavirus fears.

What happened

Shares of Booking Holdings (BKNG -4.48%) lost altitude last month as the online travel agency pulled back along with much of the broader travel industry over concerns about the novel coronavirus outbreak. According to data from S&P Global Market Intelligence, shares finished down 11%.

As you can see from the chart below, the stock's decline accelerated in the second half of the month as fears about the coronavirus rippled through the market, weighing broadly on stocks, specifically in the travel sector.

BKNG Chart

BKNG data by YCharts.

So what

Over the second half of January, fears spread about the coronavirus, which started in Wuhan, China, as the World Health Organization labeled it a global health emergency, the death toll climbed to above 300, and U.S. airlines began suspending flights to China.

A person in an airport terminal in silhouette, watching a plane take off.

Image source: Getty Images.

Travel stocks like Booking, which owns, Kayak, Priceline, and the Asia-focused, among other nameplates, are highly sensitive to macroeconomic factors, and analysts were quick to observe that Booking could take a hit from the outbreak, especially if it was sustained and continued to disrupt international travel.

On the last day of January, Jefferies analyst Brent Thill said there had already been a negative impact on global travel, and cut his revenue estimates for Booking, noting its exposure to the Asian market. At the same time, SunTrust analyst Naved Khan cut his price target from $2,350 to $2,250 and said the outbreak would have a "large impact" on Booking.

Now what

Shares of Booking have actually bounced back in February, rising 6% through Feb. 5, as the market has soared and concerns about the coronavirus seem to have temporarily abated. Still, the outbreak continues to expand, and its future impact is unclear, so investors may want to exercise caution.

Booking is expected to report earnings at the end of the month, and first-quarter guidance should give investors a sense of the impact of the coronavirus. For the fourth quarter, analysts are expecting revenue to increase just 1.9% to $3.27 billion, and for earnings per share to decline from $22.49 to $22.07. The weak guidance comes as online travel agencies are coping with increased competition from Airbnb and Alphabet's Google, as well as declining daily rates for hotel rooms. Booking also plans to scale its marketing spending to be more efficient, which is likely impacting revenue growth.

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