Inside Booking’s Risk Factors

Booking Holdings (BKNG) provides online travel services, such as helping people purchase flight tickets and book hotel rooms. It operates in more than 220 countries through brands such as Booking.com, Priceline, OpenTable, KAYAK, and Agoda.

For Q4 2021, the company reported a 141% year-over-year rise in revenue to $3 billion and exceeded the consensus estimate of $2.9 billion. It posted adjusted EPS of $15.83, which compared to an adjusted loss per share of $0.57 in the same quarter the previous year and beat the consensus estimate of $13.53. The company ended the quarter with $11.2 billion in cash and cash equivalents. 

With this in mind, we used TipRanks to take a look at the newly added risk factors for Booking.

Risk Factors

According to the new TipRanks Risk Factors tool, Booking’s top risk category is Finance and Corporate, with 9 of the total 35 risks identified for the stock. Legal and Regulatory and Ability to Sell are the next two major risk categories with 7 risks each. Booking has recently updated its profile with eight new risk factors.

Booking now offers alternative accommodation where customers can rent space at other people’s property instead of staying at hotels or resorts. The business is growing but the company cautions that the growth presents many challenges. For example, the business has lower profit margins and there are usually limited booking opportunities. 

The company also says that it relies on property owners to share information about the safety, suitability, and legal compliance of their listings. But it does not independently verify the information. As a result, there may be cases where property owners provide incomplete or inaccurate information, which could lead to complaints and expose Bookings to liabilities and reputational harm.

Booking informs investors that its operations rely on complex IT systems. It explains that as the travel industry begins to recover from the COVID-19 pandemic, increased demand could overwhelm its systems and result in unanticipated service disruptions if it is unable to expand the systems quickly. Such disruptions may lead to decreased customer satisfaction and cause other problems that could have a material adverse effect on Booking’s operating results and reputation.

Finally, Booking cautions that the increased focus on corporate environmental, social, and governance (ESG) practices could cause problems. It mentions that if its ESG activities fall short of expectations, it could experience difficulties in attracting and retaining employees, and its attractiveness as a business partner or investment could be adversely impacted. Moreover, missing ESG expectations could adversely affect the company’s stock price and expose it to regulatory enforcement actions and lawsuits.

Analysts’ Take

Yesterday, Credit Suisse analyst Stephen Ju reiterated a Buy rating on BKNG stock but lowered the price target to $2,850 from $3,100. Ju’s reduced price target still suggests 24.18% upside potential.

Consensus among analysts is a Moderate Buy based on 10 Buys and 9 Holds. The average Booking price target of $2,679.39 implies 16.75% upside potential to current levels.

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