Key insights
- Analysis suggests Booking Holdings ($BKNG) is well-positioned due to the shift to online travel, B2B/B2C growth, and a focus on merchant bookings. AI is seen as a positive for customer service. Strong fundamentals with consistent revenue, net income, and free cash flow growth are noted. A $457M impairment charge on KAYAK and FX losses impacted FY25 results, but share buybacks fuel EPS growth. Overall, the outlook for Booking is positive, suggesting a slightly bullish signal for the broader travel and tech sectors.
Booking $BKNG is one of these companies that I have followed for years without investing, and I believe now is a great time to have a closer look at Booking.
Booking Holdings Inc is the stock behind the well-known brands Booking.com, Priceline, Agoda, KAYAK, and OpenTable. Booking.com is the main driver behind the revenues, and hence the company renamed itself Booking Holdings.
There are multiple tailwinds for the OTA (online travel agency) industry: the shift from offline to online keeps moving on, and B2B and B2C travel are still growing at a healthy level. The current Middle East conflict left some small marks on Q1 and will also impact Q2. Since the conflict will be (hopefully soon) resolved, I don't see this as a long-term issue for Booking.
Booking keeps increasing its revenue share from merchant bookings, where Booking also facilitates the payment flow, instead of just being a search engine for hotel bookings. More than 50% of all users come directly to the platform, and the app is a major driver of bookings.
In terms of accommodation, alternative accommodations (Airbnb-style offerings) make up 4 million of the 4.5 million offerings of the platform. Flights booked on Booking keep increasing as well, and the Connected Trip strategy, where customers book more than just one service, keeps customers locked in.
AI is already helping Booking to improve customer service, and I see AI as a plus for Booking, since the LLMs won't integrate the whole payment flow anytime soon into their services. It had, however, an impact on KAYAK, which resulted in a $457 million impairment charge in 2025. This, combined with $1.5 billion in unrealized FX losses from EUR-denominated debt, negatively impacted the FY25 results.
The fundamentals are fantastic. Revenue grew at a 10% CAGR, net income at 12% CAGR, and free cash flow at 9% CAGR since 2017. The strong share buybacks fuel the EPS.
We are currently looking at an FY27 EV/net income of 16.4 and an EV/(FCF-SBC) of 16. Both EPS and FCF/share are expected to grow at ~15% going forward. On top of that, you are getting a 0.9% dividend yield that keeps growing. Given the strong underlying business, I believe that this is an interesting opportunity.
If you are interested in my detailed deep dive, you will find it here:
https://41investments.substack.com/p/ai-wont-kill-booking-it-might-make