A Travel Pair Trade: Citi Upgrades Booking Holdings, Downgrades Expedia

Citi says Booking Holdings (NASDAQ: BKNG) is looking more accomodating.

The Analyst

Citi analyst Mark May upgraded Booking Holdings from Neutral to Buy and raised his price target from $1,800 to $2,100.

May downgraded Expedia Group Inc (NASDAQ: EXPE) from Buy to Neutral and lowered his price target from $145 to $130.

The Thesis

May says with Booking Holdings underperformance over the last year, its valuation now better reflects the business’ slowdown and is now attractive on a cash flow basis.

Booking Holdings second-quarter guidance suggests top-line trends may be stabilizing and Citi proprietary data suggests trends in the European and LatAm travel markets may be improving said May.

The company has significantly upped its buybacks recent;y, and May believes that trend will continue and potentially increase further. A recent move to charge a commission on resort fees could also provide a tailwind to estimate revisions, he said.

Expedia’s downgrade comes as Vrbo’s growth has disappointed and slowed meaningfully “and this could persist and weigh on EXPE’s overall growth given Vrbo changes, Google changes, and heightened competition”, May added.

May also said Booking Holdings is stepping up its U.S. investments, which could weigh on both Expedia’s Core OTA and Vrbo growth.

Price Action

Booking Holdings shares closed down 1.61 percent at $1,716.93. Expedia shares closed down 0.23 percent at $116.44.

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