Booking Holdings is currently trading at 15.3 times its forward earnings, well below its 10-year average of 22.3 times. Despite concerns about AI affecting its stock price, the company has been meeting long-term growth targets, with less than 1% of its room night traffic coming from AI models. Booking’s direct bookings are growing, supported by a solid infrastructure that includes millions of properties and a robust payment system.
The stock’s recent decline can be attributed to three main factors: AI competition (notably from Google), geopolitical tensions affecting travel, and the impact of a weak dollar on reported revenues. Despite fears of disintermediation from AI chatbots, the company’s direct booking share continues to rise.
Management highlights that while AI has impacted some areas, it has also reduced customer-service costs. Booking’s unique marketplace, filled with independent accommodations, provides a competitive edge AI struggles to replicate.
Financially, Booking has maintained a commitment to growth targets, outperforming even during challenging macro conditions. However, the ongoing conflict in the Middle East and potential erosion of search traffic due to AI remain risks. Booking is viewed as undervalued, trading significantly below historical averages with solid fundamentals in place.
The infrastructure supporting Booking’s business is temporarily undervalued amidst narratives of disruption in the industry. This lack of recognition presents a potential upside for investors.
