What happened
Shares of Booking Holdings (BKNG 0.43%) were down 9.7% as of 1:43 p.m. ET on Thursday, even though the company delivered better-than-expected fourth-quarter earnings the day before.
Following in step with the broader market sell-off, Booking's stock price plunged following Russia's invasion of Ukraine, but this could be a good buying opportunity given the momentum happening in Booking's business.
So what
The current geopolitical situation presents uncertainty for global travel. But management noted that travel to Russia and Ukraine represents a low single-digit percentage of total gross bookings.
Meanwhile, travel is recovering nicely from the pandemic-driven restrictions in 2020. Fourth-quarter revenue surged 141% year over year to $3 billion. That is about 10% lower than the $3.3 billion the company reported in the same quarter two years ago.
The recovery in revenue also translated to much better profitability, with net income climbing back to $618 million compared to the year-ago loss of $165 million.
Now what
Despite inflation at a 40-year high, demand trends are pointing to a strong year. Room nights through the first two weeks of February were on par with 2019 levels, while gross bookings are trending higher.
The recent sell-off in the stock seems to be an overreaction to what is happening in Ukraine. The stock sells for a forward price-to-earnings ratio of 24.4 based on 2022 earnings estimates. That earnings multiple comes down to 17.6 based on 2023 estimates. The stock could be a good buy on this market dip.
Investors should be aware of increasing competition, with Alphabet's Google Travel among other tech giants showing more interest in the industry in recent years. But Booking Holdings is aiming to build a larger and faster-growing business coming out of the pandemic, as management explained on the earnings call, and its latest results should reinforce investor confidence in its future.