The increase in Booking Holdings' stock price by 5% recently.
The increase in Booking Holdings' stock price by 5% recently.
The popular online travel booking platform Booking Holdings (BKNG), saw a 4.8% increase in its stock value during the early hours of Thursday, following its impressive Q3 2024 financial reports that surpassed analyst predictions for both sales and earnings.
Initially forecasted to make a profit of $77.47 per share on $7.6 billion in sales, Booking Holdings shocked the market by reporting an adjusted earnings of $83.89 per share, despite lower sales of around $8 billion.
Booking Holdings' Q3 Financial Performance
However, not all news was positive. While the company witnessed a 9% year-over-year increase in total sales, its net income remained relatively stagnant at $2.5 billion. Although Booking Holdings' adjusted earnings surpassed predictions, its quarterly net income per share of $74.34 showed a relatively modest 7% year-over-year growth.
This entire increase in Booking's earnings per share can be attributed to share buybacks, which decreased the share count by approximately 6%. This practice, known as share concentration, concentrates earnings among fewer shares and results in better per-share growth than the overall net income growth.
Should You Buy Booking Stock?
Despite these figures, the reduction in share count due to share buybacks can be seen as a shareholder-friendly move, as it accelerates earnings per share growth without relying on actual income growth.
Moreover, the company's free cash flow for the year has reached $7.2 billion, marking a 26% increase from the previous year. If Booking continues to generate cash at its current rate, it is projected to reach around $9.6 billion in free cash flow for this year, surpassing Wall Street's prediction of $7.5 billion for 2024.
With an enterprise value of $150 billion, this stock might be priced at a reasonable 15.6 times its current-year free cash flow. Considering its 0.8% dividend yield and an estimated long-term growth rate of earnings by 15%, this stock seems like a sensible investment opportunity.
To summarize, Booking Holdings stock appears to be a worthwhile investment.
Given the company's impressive financial performance, individuals interested in investing may want to consider diversifying their portfolios by investing in Booking Holdings' shares. The company's strong free cash flow, share buybacks, and projected earnings growth make it an attractive option for potential investors looking to invest in the finance sector. Additionally, its reasonable valuation and decent dividend yield further enhance its investment potential.