Is Booking Holdings Stock The Perfect Long-Term Play On Wall Street?

Following a period of sustained outperformance throughout 2024, has Booking Holdings BKNG become a major long-term investment opportunity within the travel and tourism landscape? 

The global tourism industry is recapturing form following a long period of disruption caused by the pandemic. This has seen flight reservations and accommodations grow steadily as digital transformation helped to leverage more efficiency in putting travelers in touch with bespoke holiday experiences. 

As a result, the online travel market reached almost $600 billion in 2023, and experts believe that the industry will surpass $800 billion by 2028, making it a major opportunity for investors to embrace. 

Early 2024 saw Booking Holdings surpass expectations on every operational metric thanks to larger booking windows, sales resilience in Europe, and a weaker-than-anticipated impact of the war in the Middle East over travel. 

Recent US Federal Reserve rate cuts and expectations over the return of consumer spending power are likely to drive optimism higher regarding travel stocks like Booking Holdings, but the firm's innovation pipeline could make the stock one of Wall Street's best long-term performers. 

Optimism Ahead For BKNG

Booking Holdings has gone from strength to strength in recent years, overcoming some significant hurdles presented by the pandemic. 

"The Covid-19 pandemic dealt a major blow to the company’s financial health in 2020, resulting in a significant 55% drop in revenue from the previous year, with net profit falling to a modest $59 million," explained Maxim Manturov, head of investment research at Freedom24.  

"Since then, however, Booking Holdings has not only recovered but has surpassed its pre-pandemic performance. By 2023, the company achieved a 25% increase in revenue to $21.4 billion."

The stock's Q2 2024 performance showed a continuation of this growth, with non-GAAP earnings of $41.90 per share for the quarter outperforming Zacks Consensus Estimate by 6.4% and revenues of $5.86 billion also beating estimates. 

With non-GAAP earnings rallying 11% from the year-ago quarter, Booking Holdings appears to be accelerating away from the pandemic and growing exponentially in the process. 

Booking's newfound operational optimism can be seen in the performance of the firm's UK arm, in which 2023 brought the division's annual wage bill from £20.7 million ($27.1m) to £32.2 million ($42.2m) owing to salary increases and staff bonuses. 

These bonuses came as the company posted £50 million turnover growth over the past financial year and suggest that Booking Holdings is anticipating more good times ahead. 

Banking On A Bright Future

According to Simply Wall Street analysts, Booking Holdings is significantly undervalued. Experts have suggested that the intrinsic value of the stock is $6,521.43, which is far in excess of BKNG's all-time high value of $4,268.95, which was recorded recently in September 2024.

Simply Wall Street's analysis also suggests that the stock's ongoing volatility could mean that eagle-eyed investors are well-positioned to get a good price out of upcoming market fluctuations. 

While such significant growth could seem like pie-in-the-sky thinking, Booking Holding's strong innovation pipeline may prove to be a formidable factor in its future market trajectory. 

Booking's Commitment To Innovation

Booking Holdings has been quick to embrace the power of generative AI and incorporated artificial intelligence trip planners into its suite of services in the fledgling days of the boom in 2023. 

Notably, Booking's CFO, Ewout Steenbergen, has suggested that in the next ‘three to five years' the company could leverage GenAI to deliver the first connected trip, helping to unify every facet of the holiday experience within Booking's platform. This could help the firm to broaden the firm's revenue potential and maintain its status as an industry pioneer into the future. 

Booking's commitment to becoming synonymous with the travel and tourism industry is already showing in the firm's lack of reliance on Google to drive traffic. 

According to Steenbergen, the belief that Booking relies on search engine traffic from the likes of Google is an ‘outdated perception', and the platform's business-to-consumer direct traffic is currently entering the low 60% range. 

These metrics can help to underline Booking Holdings' status as a travel market leader, which may be invaluable when it comes to quantifying its potential as a sustainable long-term investment option. 

Not All Analysts Are On Board

Despite Booking Holdings appearing to be a stock with plenty of potential, one analyst from Cantor Fitzgerald recently downgraded their rating for the stock to ‘Neutral', supplying a far lower price target of $3,590 on BKNG. 

Given the uncertain economic climate surrounding Wall Street at present, these cooler perceptions of Booking's potential serve as a timely reminder that there are few certainties throughout many tech-focused industries at present. 

With this in mind, it's certainly worth maintaining a cautious mindset when researching the long-term potential of Booking Holdings and keeping critical of all positive and negative outlooks for the stock. 

Managing Expectations

There's certainly plenty for investors to be excited about when considering the future of Booking Holdings. As an early adopter of generative AI, the travel firm has a keen eye on innovation, and its ability to drive website traffic without dependence on Google underlines its brand value at a time when the wider tourism industry is returning to pre-pandemic levels. 

This means that BKNG is a stock that demands attention from investors, and could grow to become an excellent long-term investment option on Wall Street as the wider industry continues to grow off the back of its digital transformation efforts.

On the date of publication, Dmytro Spilka did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer. Dmytro Spilka does not intend to make a trade in any of the securities mentioned above in the next 72 hours.