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Why Shares of Booking Holdings Gained 10% in May

By Lou Whiteman – Jun 3, 2020 at 8:47PM

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Is travel starting to rebound off the bottom?

What happened

Shares of Booking Holdings (BKNG -0.98%) have been hit hard by the COVID-19 pandemic, with the stock losing nearly half of its value from mid-February until late March. But investors have slowly warmed to the travel portal in the months since, with shares climbing 10.7% in May, according to data from S&P Global Market Intelligence.

So what

The reason for the stock slide early in the year was clear: Airlines and hotel demand has been all but wiped out by the pandemic, and as those businesses have fallen, so too have companies that serve the travel industry, including Booking Holdings.

The company early in May reported fiscal first-quarter adjusted earnings of $3.77 per share, well below the $6.10 consensus, as room nights booked during the period decreased 43% year over year. Booking Holdings had already withdrawn full-year guidance before the release but used the earnings report to lay out the steps it was taking to weather the storm.

Two planes flying in opposite directions.

Image source: Getty Images.

"The COVID-19 pandemic has profoundly impacted our company and the entire travel industry," CEO Glenn Fogel said in a statement. "Looking forward, due to the value of our platform, our highly variable cost structure and strong liquidity, I am confident that we will emerge from this crisis in a position of strength that will allow us to extend our leadership role in the industry."

Booking in April raised $750 million in convertible senior notes to help pad its liquidity. Although the results were grim, the report added to investor confidence that the company has the wherewithal to survive through the downturn and remain an industry leader once it is over.

Now what

In the near term, there isn't much Booking Holdings can do. The company is inescapably tied to the travel industry, and travel has been hit hard by the pandemic. If the global economy is in the recession once the pandemic is resolved, it's going to take a while to recover. Even in the best-case scenario, airlines are expecting it to take years to return to pre-pandemic volumes.

The good news is, I believe travel will eventually recover. And Booking Holdings remains a best-of-breed portal for consumers looking to go places. The near-term is full of turbulence and uncertainty, but for long-term holders who remain bullish on travel, Booking Holdings is a solid choice to add to the portfolio.

Lou Whiteman owns shares of Booking Holdings. The Motley Fool owns shares of and recommends Booking Holdings. The Motley Fool has a disclosure policy.

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