While slightly down today, Booking stock (BKNG) recently crossed the $5000 per share mark, continuing a remarkable rally that has seen its stock rise by nearly 60% over the past year. This makes the reservation platform giant boast one of the highest nominal share prices in the market. However, a high share price doesn’t necessarily imply that the company is overvalued. In Booking’s case, the company is on track for record revenue and earnings this year, showing strong growth momentum. To me, this easily justifies its current valuation, which is why I remain bullish on the stock.
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BKNG’s Continued Growth Fuels Bullish Momentum
Let me begin by highlighting Booking’s recent quarterly performance, particularly its sustained growth trajectory, which continues to drive my bullish outlook on the stock. In Q3, Booking posted revenues of $8.0 billion, an increase of 9% year-over-year. While in the single digits, this growth rate is impressive, given the outsized growth levels achieved during the post-pandemic travel boom in 2022 and 2023. Demand for travel remains solid, and as a leader in booking everything from hotels and cars to airfares and restaurant tables, Booking stands as a top beneficiary.
But let’s dive a bit deeper into the specifics. The company saw strong performance in Europe, where room night growth accelerated during the quarter, benefiting from an extended booking window starting in August. Additionally, growth in Asia remained robust, with double-digit gains, while room night growth in the U.S. showed stable expansion, albeit at lower levels than Europe and Asia.
In the meantime, alternative accommodations also grew by 14%, boosted by increasing property listings and a strong appetite for varied travel experiences. To this end, the company’s “Connected Trip” vision—designed to encourage customers to seamlessly book multiple aspects of their journey on the platform—contributed significantly, with transactions in this category increasing by over 40% during the quarter. I am particularly keen on this, as Booking could directly compete with Airbnb (ABNB) in this space.
Booking’s Earnings Are Set to Hit New Records
More importantly, Booking’s earnings are expected to grow faster than its revenue this year, setting new records and strengthening the bullish case. As you may know, this is possible due to the scalability of its business model. As a facilitator of travel services, Booking benefits from a structure that incurs minimal incremental costs with each additional booking. With operating expenses remaining relatively stable as reservation volumes increase, the company can efficiently expand its profit margins.
While net income grew 9% year-over-year in line with revenues, this was due to one-off expenses related to the proposed settlement of certain tax matters and other non-recurring items. As we lap these one-off expenses next year, when they no longer affect results, we can anticipate a notable margin expansion for Booking. In any case, adjusted earnings per share (EPS) grew notably faster at 16%. This was due to the company’s ongoing share repurchase program, which reduced the average share count by 6% over the past year.
Booking’s Valuation Is Still Reasonable
Now, despite Booking’s top and bottom-line growth, one might argue that the 60% share price gain over the past year might imply that the stock has entered overvalued territory. However, that’s not necessarily the case. Following Booking’s latest results, analysts expect record revenues and EPS for the full year, with the latter anticipated to reach $182.83—up 20.1% from Fiscal 2023. Wall Street sees further EPS growth of 14% in Fiscal 2025, implying that Booking stock is trading at about 24 times next year’s earnings.
In my view, this multiple is quite reasonable, especially when considering Booking’s ongoing growth, the strength of its brand, and its high-margin business model. Booking has built a robust moat through its diversified travel offerings, strong relationships with millions of accommodation partners, and initiatives such as its Genius loyalty program. Along with the fact that Wall Street has historically been conservative regarding Booking’s EPS estimates, further upside seems quite possible from the stock’s current valuation despite the high nominal share price.
Is BKNG Stock a Buy, According to Analysts?
Wall Street seems to be a bit more skeptical regarding Booking’s prospects. While BKNG stock features a “Strong Buy,” with recent analyst ratings consisting of 18 Buys and 11 Hold ratings over the past three months, at $5,017.64, the average BKNG stock price target implies just a 1.47% downside potential.
For the best guidance on buying and selling BKNG stock, look to Mark Mahaney. He is both the most accurate and most profitable analyst covering the stock (on a one-year timeframe), boasting an average return of 39.38% per rating and a perfect 100% success rate.
Final Thoughts
In conclusion, Booking continues demonstrating excellent growth momentum, fueled by robust demand across regions, innovative offerings like the “connected trip,” and a scalable, high-margin business model. With record revenues and earnings on the horizon and what appears to be a reasonable valuation relative to next year’s and future earnings, the company remains well-positioned to deliver further upside despite its prolonged rally over the past year.
