Stock in Focus: Booking Holdings
Booking Holdings reported a strong Q4 with net income almost doubling to $1.24B and revenue growing +33% YoY to $4B. Booking Holdings remains our prefered way to gain access to the growing travel sector (reopening from Covid, but also people spending more on experiences than things) – the company is a ‘must have’ for any hotel, and as such commands a ‘royalty’ on each room booked (20-30% of the total room price). The company beat analyst’s EPS expections by 12%, coming in at $24.74 per share. We think the company – though fully valued – trades at a decent multiple (17x fwd earnings) compared to competitors like Airbnb, which trades at 36x fwd earnings. We also think there’s a lot of people who don’t want the variable responsibilites of an Airbnb – they just want a place to stay. We added a 1% position in Booking Holdings to our US Model Portfolio and advise adding more upon weakness. The stock isn’t cheap, but it is quality. Buy.
New Zealand Market Movers
The New Zealand market (NZX50, -0.5%) was down yesterday, as weak global sentiment hit local markets on an otherwise quiet day of trade.
Pushpay rose another +4%, after revealing that the Sixth Street and BGH Capital consortium is exploring a potential alternative takeover proposal and the deadline to call another shareholders meeting has been extended to next Monday – if another offer is not made by then either party can terminate the scheme implementation arrangement.
Australia Market Movers
The Australian Market (ASX200, -0.8%) was down as the Fed had a different plan towards the RBA, continuing to hike further than expected.
The news saw most sectors lower, energy and miners most sensitive to weak global outlook hit hardest. The above news while Woodside Energy going ex-dividend on a large dividend payout saw the stock fall -7.2%.
Qantas Airlines rose +2.9% to three year high, after the Australian Competition Commission report said that airfares remain above 2019 levels but delays and cancellation rates had improved.
US Market Movers
The S&P 500 ended the session a touch higher up +0.15%. Notably, the world’s four largest fragrance suppliers were raided by authorities overnight on anti-trust and price fixing concerns. Firmenich and Givaudan, Germany’s Symrise and US group International Flavors & Fragrances were all targeted – together they control ~60% of the world’s ~$40B-a-year fragrance business. The stock of all companies implicated was down 3-4% on average as of writing. It’s rare that multiple authorities (Swiss, US, EU) work together on a probe of such scale — under EU laws the maximum fine is 10% of a company’s gross revenues – it’s a hefty fine. We’re keeping a close eye on this situation: ideally we would like to find an entry point into the flavours and fragrance business – it’s compelling (they don’t only make perfume; their chemicals are in everything from soft drink to hand sanitiser) but trades at elevated valuations. Further pain in the company’s respective stock prices may provide an attractive entry point. As an idea of what a fine may look like, Germany’s Symrise made €3.8B in revenues last year, so a fine would look like €380M.
Markets in general seemed to absorb Powell’s comments yesterday and shrug them off. It wouldn’t be the first time Powell has talked “big game” only to raise rates 25 bps. We still think a 50 bps hike is likely. Consumer trajectory is too strong to counter with “only” 25 bps.
What Markets will be Watching this Week
Monday
Tuesday
Reserve Bank of Australia (RBA) interest rate decision
Wednesday
Thursday
Bank of Canada (BoC) interest rate decision
Friday
US Non-Farm Payrolls
Bank of Japan (BoJ) interest rate decision