We came across a bullish thesis on Booking Holdings Inc. (BKNG) on Substack by Global Equity Briefing. In this article, we will summarize the bulls’ thesis on BKNG. Booking Holdings Inc. (BKNG)’s share was trading at $4764.16 as of March 26th. BKNG’s trailing and forward P/E were 27.59 and 22.62 respectively according to Yahoo Finance.
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Booking Holdings has cemented itself as the dominant player in the travel industry, leveraging its extensive portfolio of brands to create a seamless, full-service travel ecosystem. Unlike Airbnb, which primarily focuses on short-term rentals, Booking spans hotels, flights, car rentals, and restaurant reservations, making it the world’s largest travel company with a market capitalization of $163 billion and platform sales exceeding $165 billion. Its flagship brand, Booking.com, leads the global hotel booking market, while Priceline, Agoda, Kayak, OpenTable, and Rentalcars.com further extend its reach across various travel-related verticals. This diversification has enabled Booking to generate multiple revenue streams, including hotel booking commissions, advertising, and direct hotel and airline resales, where it purchases inventory at a discount and resells at a markup, accounting for 59.6% of its total revenue.
Despite Airbnb’s rapid rise, Booking has consistently maintained its lead, with its platform sales nearly double those of Airbnb. Its ability to scale across multiple travel categories makes it a one-stop shop for travelers, providing a superior booking experience. In 2024, Booking generated $23.7 billion in revenue, reflecting an 87% increase from 2017, with a 9.4% CAGR. Analysts project Booking’s growth to slow to 6.6% in 2025 before rebounding to 8.8% in 2026, positioning it as a resilient, high-margin business. Booking’s marketing strategy, however, comes at a cost. It spent 30.7% of its revenue on marketing in 2024—nearly double Airbnb’s 15.8%—as it aggressively acquires customers through paid advertising. Despite this higher spend, Booking maintains superior operating margins of 32% versus Airbnb’s 23%, and its net income margin of 24.8% remains higher than Airbnb’s 23.9%, despite incurring $181 million in net interest expense.
Booking’s financial strength is reinforced by its robust free cash flow generation, with a 33.3% free cash flow margin in 2024, just below Airbnb’s 40.7%. The disparity is mainly due to Airbnb’s favorable working capital dynamics and higher stock-based compensation. Over the long term, Booking has been a more consistent cash generator, making it a reliable cash flow machine. It also strategically manages its balance sheet, holding $17.2 billion in debt but maintaining over $16 billion in cash. Unlike Airbnb, which operates with minimal debt, Booking has used leverage to finance acquisitions and aggressive share repurchases, reducing its share count by 34% since 2015. Despite these strengths, Booking trades at a discount to Airbnb, with a forward P/E of 29 versus Airbnb’s 34, and its 2027 P/E is 26% lower. This valuation gap reflects the market’s belief that Airbnb has greater long-term growth potential, but Booking’s superior profitability and capital returns challenge this assumption.
Looking forward, Booking faces both risks and opportunities. Regulatory scrutiny limits its ability to pursue large-scale acquisitions, forcing it to rely on operational improvements and organic growth. However, its dominant market position, disciplined financial management, and commitment to shareholder returns make it a compelling long-term investment. With strong free cash flow, continued share repurchases, and an attractive valuation, Booking presents a compelling risk-reward opportunity in the travel sector.
Booking Holdings Inc. (BKNG) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 99 hedge fund portfolios held BKNG at the end of the fourth quarter which was 93 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.