Wedbush analysts initiated coverage of Booking Holdings (NASDAQ:BKNG) with an Outperform rating and Airbnb (NASDAQ:ABNB) with a Neutral rating in a note to clients on Tuesday.
The analysts also assumed co-coverage of Uber Technologies (NYSE:UBER) with an Outperform rating and assigned Clear Secure (NYSE:YOU), DoorDash (NYSE:DASH), Expedia (NASDAQ:EXPE), and Lyft (NASDAQ:LYFT) Neutral ratings.
Booking is also labeled one of the firm's top ideas. Wedbush analysts explained that they favor the stock given its "(1) leading competitive position, (2) best-in-class margins (35%+ long-term margins), (3) strong free cash flow generation (we expect the company to generate ~$7B in FCF in 2024), (4) diversified geographic mix, and (5) disciplined capital allocation with $22B in remaining repurchase authorization equal to ~23% of its market cap."
On Airbnb, the analysts said they believe recent platform innovations have deepened the company's moat relative to competitors and have strengthened the value proposition to both guests and hosts.
"Airbnb has demonstrated an ongoing commitment to improving its core service with frequent product releases and updates. Importantly, management's targeted approach has effectively steered innovation towards the areas of highest friction," they wrote.
The analysts concluded that travel demand is still healthy and broadly recovered versus 2019, but they noted that YoY growth is slowing with emerging signs of normalization.
"Booking continues to beat Expedia with operational advantages that we view as structural," they added. "Airbnb dominates the alternative lodging category as frequent product investments compound over time."