07 August 2020

Booking Holdings Shares Head North Despite Q2 Loss

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News shaping
the markets today

     

What’s happening: Shares of Booking Holdings climbed in extended trading on Thursday despite the company reporting losses for the second quarter.

What happened: Travel demand plummeted during the second quarter, as the pandemic crushed tourism and various governments imposed different degrees of travel restrictions. In the face of unprecedented pressure, various travel giants were forced to reduce their workforce by almost a quarter.

Shares of Booking Holdings and rival TripAdvisor climbed yesterday, despite both online travel aggregators reporting losses for the second quarter, as the US State Department said it would ease its global travel advisory.

How were the results: Booking Holdings reported a massive decline in revenue and net profits, although exceeding expectations on both metrics.

  • Revenues plunged 84% to $630 million, while beating the consensus views of $561.7 million.
  • Net income stood at $122 million, or $2.97 per share, down from $979 million, or $22.44 per share, in the same quarter last year.
  • Adjusted loss came in at $10.81 per share, but was lower than the expectations of a loss of $11.54 per share.

Why it matters: Travel demand around the world took a massive hit last quarter, forcing hotels to close and airlines to ground their planes, amid the pandemic. Government issued travel warning killed tourism, while video conferences replaced business trips globally.

With the pandemic wiping out the typically lucrative summer season, Booking Holdings reported a whopping 91% decline in gross travel bookings to $2.3 billion, with room nights booked tumbling 87%.

Agency revenues dropped to $357 million, versus $2.61 billion in the year-ago quarter, while advertising and other revenues contracted massively to $28 million, from $284 million reported for the same quarter last year.

Earlier this week, the Norwalk, Connecticut-based company announced to lower its global workforce by 25%, laying off around 4,000 people, as a part of its broader restructuring efforts.

Despite the grim results, investors were encouraged by an improvement in travel booking trends since April. Investor sentiment was also lifted by the US State Department moving to country-specific restrictions on travel from a global Level 4 travel advisory, citing improving health and safety conditions in some countries.

How shares responded: Shares of Booking Holdings climbed 3.9% to $1,820.00 in after-hours trading. The stock has lost around 15% this year, versus a 3% gain in the S&P 500.

What to watch: With Booking Holdings witnessing some improvement in bookings over the past two months, investors will look for more good news on this front. The market will closely monitor tourism and business travel, given the recent increase in the booking of vacation rentals amid easing restrictions. Concerns remain, however, around Booking Holdings taking longer to recover due to is exposure to Europe, with the region contributing more than 50% of its overall revenues.

The Markets Today

     

The Canadian dollar will be in focus today, ahead of its jobs reports scheduled for release later in the day.

Context: The loonie retreated from its five-month high and fell versus the US dollar on Thursday following a decline in oil prices.

Details: The Canadian dollar has climbed more than 10% since March owing in part to a broader weakness in the US dollar versus a basket of major currencies.

Investors added more Canadian dollars to their portfolio, with the country’s economy showing some signs of a recovery and a rise in commodity prices. Crude oil, one of Canada’s major exports, snapped a four-session winning streak on Thursday and fell to $41.95 per barrel.

In economic news, housing sales volume in Toronto rose by 29.5% in July. Investors look towards Canada’s employment report for further confirmation of an economic rebound. The country had added around one million jobs in June.

After hitting its strongest intraday level of 1.3229 since February 21, the loonie declined 0.2% to 1.3290, or 75.24 cents, versus the greenback on Thursday. The currency remained range bound between 1.3243 and 1.3322 during the previous session.

Canada’s government bond yields traded down on Thursday, with the 10-year yields falling 4 basis points to 0.463%. 

What to watch: Investors await reports on employment change, unemployment rate and Ivey PMI. The Canadian economy, which added 953,000 jobs in June, is projected to add 400,000 jobs in July. Analysts expect the unemployment rate to decline to 11% in July, from 12.3% in June. The Ivey PMI, which climbed to a seven-month high of 58.2 during June, is expected to decline to 57.5 in July.

Investors will continue to keep an eye on the covid-19 figures, with the total number of cases surpassing 19 million globally.

Other Markets: US indices trading closed higher on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.68%, 0.64% and 1%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

China’s foreign exchange reserves, Germany’s balance of trade, industrial production and current account, France’s industrial production, balance of trade, current account and payroll employment in the private sector, Spain's industrial production, the UK’s Halifax house price index, Italy’s balance of trade, Mexico’s inflation rate, Turkey’s gross foreign exchange reserves, Brazil’s inflation rate, car production and new vehicle registrations, South Africa’s foreign exchange reserves, Russia’s foreign exchange reserves as well as US nonfarm payrolls, unemployment rate, wholesale inventories, Baker Hughes crude oil rigs and consumer credit.

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