Travel and reservation agency powerhouse, Booking Holdings (NYSE:BKNG), has been sputtering lately. During the past year, the shares have shedded more than 15% of their value. The problem? Well, Booking Holdings stock is suffering from a lack of meaningful growth on the top-line. As seen with the latest quarter, the company posted lackluster guidance.
Then again, the competitive environment is getting more intense, as Expedia Group (NASDAQ:EXPE) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) have ramped up their efforts. But Booking Holdings stock has also come under pressure from the effect of operators like Airbnb, which may go public this year. Oh, and companies like Hilton Hotels (NYSE:HLT) and Marriott International (NASDAQ:MAR) are trying to look for ways to cut out the middlemen.
In the meantime, there is the slower growth in Europe and China, and it is far from clear when things will start to pick up again.
No doubt, all these are quite worrisome. But I still think there is value with Booking Holdings stock as Wall Street appears to be overeating.
So let’s take a look at some of the bullish factors:
Reason #1: Diverse Global Platform
The roots of Booking Holdings go back to 1997, during the heyday of the dot-com boom. At the time, the company was focused on providing a “Name Your Price” model for purchasing airline tickets.
Yet since then, BKNG has gone through a major transformation, mostly driven by aggressive M&A. Now the company has an extensive platform, which includes the following:
- Priceline.com/Booking.com: These brands are for reservations for hotels, rentals, airline tickets and vacation packages.
- KAYAK: This is a meta-search service that allows users to comparison shop for travel options.
- Rentalcars.com: This is a top global rental car reservation service.
- Agoda: This property provides accommodation reservations in Asia.
- OpenTable: This service allows for booking restaurant reservations.
In other words, BKNG is quite diverse. But there also are strong synergies across the properties. What’s more, the wide platform has allowed the company to capitalize on emerging growth opportunities, such as alternative accommodations. The business posted revenues of $2.8 billion last year.
Then there is the mobile side, which has been thriving. The company is a top 10 app in over 100 markets across the world.
Reason #2: Expanding Market
In a way, the competition is a good thing for BKNG. It’s a clear indication that the market is enormous and growing. For example, according to Zion Market Research, the category is forecasted to hit $1.955 trillion by 2026. This would come to a compound annual growth rate of 12.1%.
Some of the driving forces include: the ubiquity of smartphones, the availability of secure payment systems and rising income in emerging markets.
So all in all, there are strong tailwinds that should help gin up growth for Booking Holdings stock, especially since it has a broad base of offerings that span key parts of the online travel space.
Reason #3: Valuation
For the most part, it looks like much of the problems are baked into Booking Holdings stock. After all, the valuation is fairly low at current levels, with the forward price-to-earnings ratio at about 16X or so. This is reasonable in light of the company’s strong positioning and brands in core markets. Such advantages are difficult for companies to replicate.
Besides, the company continues to generate substantial cash flows, which allow for healthy buybacks and acquisitions. Last year the company reported EBITDA of $5.7 billion, up about 18% on a year-over-year basis.
Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.