One of them is the world’s largest online travel agency. Here’s why I think the stock could be a steal at today’s price.

A dominant platform

The company I’m talking about will be familiar to most readers: Booking Holdings (NASDAQ:BKNG). As well as the eponymous Booking platform, it owns Priceline, Agoda, (a leader in Asia), KAYAK, and OpenTable (online restaurant reservations).

Last year, the tech firm booked more than 1.2bn room nights, an incredible number that was 8% higher than the year before. Revenue increased 13% to just shy of $27bn, while adjusted EBITDA jumped 20% to $9.9bn.

Net income did fall 8% to $5.4bn, but some of that was accounting-related noise (impairments). Even so, that was good for a net margin of 20%, which shows how uber-profitable this asset-light booking platform is.

From roughly $9.1bn in free cash flow, the firm returned $8.2bn to shareholders via share buybacks and dividends. And since 2022, Booking has reduced its share count by a whopping 22%.

Our data, deep industry knowledge, and relationships with millions of partners on the ground remain a critical differentiator to propel future growth…The long-term drivers of our industry remain compelling.
CEO Glenn Fogel

Q1 was also strong, with gross bookings growing 8%, revenue up 10%, and room nights rising 6% (all at constant currency).

But why is the stock struggling?

Despite this solid performance, Booking stock is down 21% since August and 14% year to date.

The reason appears to be twofold. First, there’s the conflict in the Middle East, which impacted gross bookings growth in Q1 and will do so again in Q2. Any resumption of the war is a major near-term risk.

Second, some investors worry that AI agents pose an existential threat. Why? Well, if they can simply compare prices across the web and automatically book the cheapest option, the consumer no longer needs to visit apps like Booking. 

While I don’t want to minimise this theoretical AI risk, it’s worth noting that agents aren’t really being used by consumers yet. Moreover, Genuis Level 2 and Level 3 travellers represent over 30% of Booking’s active users and they habitually use the app.

For the record, I’m a loyal customer. In April, I booked a hotel in Poland, then last week a couple of nights in York. Both times I got discounts through the Genuis loyalty programme.

Finally, Booking is rolling out AI features itself. For example, you can ask a bot to plan a trip through natural language rather than manually toggling a load of filters.

The stock looks on sale

For me, Booking remains one of the highest-quality ways to ride the long-term rise of international travel. The Middle East situation should be a distant memory for investors in five years’ time, while I think the stickiness of the loyalty programme is underappreciated.

Currently, the stock’s trading at just 17.5 times forward earnings — near the cheapest it has been in around a decade. As such, I think investors should consider checking out Booking on the dip.

Should you invest £5,000 in Booking Holdings right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Booking Holdings made the list?

Ben McPoland has no position in any of the companies mentioned.

The post Down 21% and on a P/E of 17, this world-class S&P 500 stock looks on sale to me appeared first on The Twelfth Magpie.