What happened

Shares of Booking Holdings (BKNG -0.60%) were pulling back Thursday after the world's largest online travel agency reported fourth-quarter earnings Wednesday night. Though results beat expectations on the bottom line, investors may be taking some profits after the stock's significant run-up over the past few months.

As of 1:55 p.m. EST, Booking Holdings' share price was down by 5.9%.

Two tourists smiling and taking pictures

Image source: Getty Images.

So what

Booking Holdings, which also owns Priceline, Kayak, and numerous other online travel agency brands, saw business continue to plunge in the fourth quarter -- an expected result given the challenges of the pandemic. Room nights booked fell 60% year over year, leading to a 65% decline in travel bookings to $7.3 billion. Revenue was down 63% to $1.24 billion, which matched estimates.

Thanks to cuts in its marketing budget, the company held its adjusted EBITDA loss to $38 million, and reported an adjusted net loss of $0.57 per share, which was better than analysts' consensus expectation for a loss of $4.28 per share.

"The travel environment continued to be challenging through the fourth quarter of 2020 and into January 2021 as COVID-19 case counts remained very high and travel restrictions were reimposed in many parts of the world," CEO Glenn Fogel said. "However, in recent weeks, we have started to see some improvements in booking trends that we will continue to monitor."

Now what

The reason for the sell-off seemed to be that Booking shares had gained 50% since the beginning of November on hopes for the COVID-19 vaccines, and the declining trend in coronavirus cases across much of the world in recent weeks had further helped it, given that the company is one of the more obvious recovery plays. In fact, the stock was up nearly 20% from the beginning of 2020, indicating that a recovery already seems to be priced in.

The good news for investors is that the company is more confident than ever about the outlook for the travel industry, and Fogel said on the earnings call said that booking trends had begun to improve in recent weeks. He also noted that in Israel, which has already vaccinated more than half of its population, domestic bookings are up by solid double-digit percentages from 2019 levels. That strongly suggests that as other countries reach higher levels of vaccinations and travel becomes safer, we'll see a surge in bookings for long-postponed vacations and family visits.

The question for Booking Holdings right now is how much can it capitalize on this broader resumption of travel and what that means for its business over the long term.