We came across a bullish thesis on Booking Holdings Inc. (BKNG) on Rijnberk InvestInsights’ Substack by Daan Rijnberk. In this article, we will summarize the bulls’ thesis on BKNG. BKNG Technologies, Inc. share was trading at $4177.56 as of Sept 24th. BKNG’s trailing and forward P/E were 29.32 and 20.41 according to Yahoo Finance.
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Booking Holdings is an online travel services agency that operates in over 220 countries helping travelers with accommodations, flights, car rentals, and restaurant bookings. While it is only the second-largest online travel agency in the U.S. it has dominated the European and Asian markets with a staggering 40% market share. Booking’s strong market presence can be seen from its growing revenue at a rate of 12% CAGR. We can see that the company has been highly efficient in converting its sales to cash from its reported FCF margin of 33% enabling the company to return $1.9 billion to shareholders through repurchases and dividends, further strengthening its balance sheet. Having an ROIC exceeding 35% shows the high returns it generated from its investments.
Post Covid 19 after the normalization of the travel industry Booking saw its business improving with a 7% increase YoY in room nights booked driven by the Asian markets followed by Europe and U.S. This contributed to an increase in adjusted EBITDA by 7% despite facing temporary headwinds from forex changes.
With respect to the S&P 500 Booking shares have underperformed making them an attractive time to enter. The shares have lost 14% in recent months making them cheap largely due to general market sell-offs and earnings reactions. Looking at its growth prospects due to Booking trying to be a complete travel service where one can book everything—hotels, flights, activities—on one platform helps keep customers coming back and booking more often. Their Genius loyalty program is a strong point, with 30% of users at higher levels, leading to more frequent bookings and their investment in alternative accommodations is paying off, with 7.8 million listings and a 12% increase in bookings in Q2. Younger people prefer loyalty programs and all-in-one services, making Booking more attractive than Airbnb. With many bookings coming from their mobile app, Booking is gaining more market share thus shares seem undervalued setting a target price of $4711 by the end of 2026.
Booking Holdings Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 96 hedge fund portfolios held BKNG at the end of the second quarter which was 97 in the previous quarter. While we acknowledge the risk and potential of BKNG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BKNG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.