What Can Investors Learn from Booking’s Newly Added Risk Factors?


This article was originally published on TipRanks.com

Connecticut-based Booking Holdings (BKNG) provides an online platform for making travel and restaurant reservations. It operates through brands such as Booking.com, Priceline, OpenTable, and KAYAK, and serves customers in more than 220 countries.

Booking’s earnings report shows revenue increased 77% year-over-year to $4.7 billion in Q3 2021, exceeding the consensus estimate of $4.3 billion. It posted adjusted EPS of $37.70 versus $12.27 in the same quarter last year and beat the consensus estimate of $32.73. The company ended Q3 with $11.7 billion in cash and $9.9 billion in long-term debt.

Booking recently agreed to acquire hotel rooms distributor Getaroom and flight booking provider Etraveli Group for $1.2 billion and 1.63 billion euros, respectively. It intends to roll Getaroom into its Priceline brand and operate Sweden-based Etraveli as a standalone brand.

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 main risk category is Finance and Corporate, representing 25% of the total 32 risks identified for the stock. Legal and Regulatory and Ability to Sell are the next two major risk categories, accounting for 22% and 19% of the total risks, respectively. Booking recently updated its profile with three new risk factors.

The company cautions that cyberattacks could lead to service outages and revenue loss. Additionally, the company’s reputation may be harmed and it may incur additional costs to correct the problem.

Investors and regulatory authorities are increasingly focusing on companies’ environmental, social, and governance (ESG) practices. Booking tells investors that it is moving toward setting ESG goals and enhancing reporting in this area. However, it cautions that achieving the ESG goals will depend on many factors beyond its control. In environmental, for example, it mentions the costs involved in limiting its use of carbon-based energy sources. Booking also says that ESG standards are still evolving and that tracking and reporting on the progress of its ESG goals will result in additional expenses. The company warns that failure to deliver on its ESG goals could adversely affect its business, damage its reputation, and expose it to lawsuits or regulatory enforcement actions.

Booking tells investors that its operations rely on certain third-party computer systems. For example, it mentions that its accommodation reservation and payment processing platforms are powered by third-party services. Booking cautions that its agreements with third-party providers could be terminated on short notice and may cause service disruptions. If an existing third-party provider stops offering its service, Booking may not find a replacement in a timely manner or on favorable terms. If a payments provider faces operational difficulties or suspends its service, Booking warns it could experience cash flow problems.

The Finance and Corporate risk factor’s sector average is 40%, compared to Booking’s 25%. Booking’s stock has gained about 6% since the beginning of 2021.

Analysts’ Take

J.P. Morgan analyst Doug Anmuth recently upgraded Booking to a Buy from a Hold and assigned it a price target of $2,690. Anmuth’s price target suggests 13.71% upside potential.

Consensus among analysts is a Moderate Buy based on 14 Buys and 9 Holds. The average Booking price target of $2,820.82 implies 19.24% upside potential to current levels.

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