08 May 2020

Investors Take a Break from Booking’s Stock

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What’s happening: Shares of Booking Holdings slipped in after-hours trading on Thursday despite the travel giant exceeding revenue estimates for the first quarter.

What happened: The Norwalk, Connecticut-based company is the first among the online travel companies to report quarterly results since the beginning of the coronavirus crisis in the US. Investors and smaller rivals in the travel space will consider Booking’s results as a benchmark during the current pandemic.

Investors were positive heading into the earnings release for the company, sending the stock higher by almost 5% during the regular trading hours. The shares declined, however, in extended trading despite Booking’s upbeat revenue. Investors remained concerned even as various regions announced a gradual easing of restrictions.

How were the results: Booking’s revenue declined and the company swung to a loss in the first quarter.

  • The online travel site reported a quarterly loss of $699 million, or $17.01 per share, versus a net income of $765 million, or $16.85 per share, in the same quarter last year.
  • Revenues declined 19% to $2.29 billion in the quarter, but beat the consensus estimates of $2.15 billion.
  • Adjusted earnings fell to $3.77 per share, from $11.17 per share in the year-ago quarter, and came in significantly short of Wall Street’s expectations of $5.61 per share.

Why it matters: The pandemic has pushed governments to impose travel bans and most of the world to stay at home, forming dark clouds over the travel industry. Although some governments are gradually easing restrictions, social distancing norms are likely to remain in place and vacationing may be the last activity that people resume.

In fact, the travel industry seems to be heading for the worst slowdown in several years. Amid this scenario, Booking has asked for government help to save the company, while rivals Airbnb and TripAdvisor have announced a significant reduction to their workforce.

Booking witnessed a sharp decline of more than 85% in room night reservations in April, while gross travel bookings tanked 51% to $12.4 billion in the quarter.

The company warned last month of the crisis hurting its second-quarter results much more than the first quarter. Management refrained from issuing nay outlook for the current quarter during the earnings call yesterday.

“It will likely be years, not quarters, before we witness a full recovery of global travel demand,” Chief Executive Officer Glenn Fogel said. “We believe that either a vaccine or effective treatment is needed before people will feel fully comfortable traveling the way we did before the pandemic started.”

How the shares responded: Booking’s shares climbed 4.7% during the regular session on Thursday, but declined 1.6% in after-hours trading. Although the stock remained on a downtrend over the last three months, it outperformed rivals Expedia and TripAdvisor. Booking’s stock has lost around 24% over the past three months, while shares of Expedia and TripAdvisor have declined by 40% and 35%, respectively

What to watch: Despite various economies easing lockdown restrictions, travellers are unlikely to take vacations and return to staying at hotels in the near future. However, investors do expect the company to make a slow recovery, as countries emerge from the COVID-19 crisis.

The Markets Today

     

The Canadian dollar may be in focus today, ahead of the much-awaited jobs report scheduled for release later in the day.

Context: The Canadian dollar rose versus the US dollar on Thursday, rebounding from its two-week low level. Traders welcomed the Federal Government’s announcement to lift salaries for essential workers during the coronavirus crisis.

Details: Prime Minister Justin Trudeau disclosed that a deal between the federal government and country’s provinces had been reached to boost wages of essential workers. The provinces will determine who is considered as essential and the amount they are eligible to receive. As per the agreement, Ottawa will be contributing C$3 billion to fund this initiative.

Investors also cheered China’s data showing a surprise rise in exports, which stoked speculations of the country recovering from the coronavirus crisis faster than anticipated, helping support the global economy’s growth.

The Canadian currency has dropped around 8% since the beginning of this year, but is expected to recover some lost ground during the rest of the year, according to a Reuters poll.

What to watch: Coronavirus continues to remain the main focus for investors, with the total number of cases exceeding 3,845,710 globally. The number of positive COVID-19 cases in Canada has surpassed 66,200 with around 4,540 deaths.

Markets await a basket of economic reports from the country, including the jobs report, housing starts and value of building permits. The annual rate of housing starts, which declined 7.3% to 195,174 units in March, is expected to drop again to 110,000 in April. Analysts expect the unemployment rate in Canada to spike to 18% in April, from 7.8% in March. The Canadian economy probably lost 4 million jobs in March. The value of building permits, which fell 7.3% in February, is projected to drop 20% in March.

Other Markets: US indices closed higher on Thursday, with the Dow, S&P 500 and Nasdaq 100 up by 0.89%, 1.15% and 1.41%, respectively.

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What else to watch today

     

Germany’s balance of trade and current account, Spain’s industrial production, Turkey’s treasury cash balance, South Africa’s foreign exchange reserves, Mexico’s car production, auto exports and gross fixed investment, India’s deposit growth, foreign exchange reserves and bank loan growth, Brazil’s inflation rate, car production and new vehicle registrations as well as US nonfarm payrolls, unemployment rate, wholesale inventories and Baker Hughes crude oil rigs.

 

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