Booking Holdings: Intrinsic Value Soars 90% Above Share Price

Booking Holdings Inc. (NASDAQ:BKNG), the world's leading provider of online travel and related services, has seen its intrinsic value estimated by the Discounted Earnings model reach $2056.30, a staggering 90% above its current share price of $5152.13. This significant discrepancy highlights the potential undervaluation of the stock, despite its recent rally. Let's delve into the factors driving this discrepancy and explore the company's strategic initiatives that contribute to its intrinsic value.

Intrinsic Value Discrepancy

The intrinsic value of $2056.30 is calculated using the GuruFocus DCF calculator, which employs EPS without NRI as the default for the DCF model. This approach is more correlated with earnings than free cash flow historically. The current share price of $5152.13, however, indicates that the market may not fully appreciate the company's earnings potential. This discrepancy suggests that Booking Holdings' shares are trading at a significant discount to their intrinsic value.

Strategic Initiatives Driving Intrinsic Value

Booking Holdings' strategic initiatives, such as the expansion of merchant capabilities and AI investments, contribute to its intrinsic value in several ways:

1. Revenue growth and operational efficiency: The expansion of merchant capabilities and AI investments are expected to drive revenue growth and improve net margins, which in turn supports the connected trip vision. This growth in revenue and improved margins directly contribute to the company's intrinsic value.
2. Cost-cutting and strategic expansion initiatives: These initiatives are expected to provide further valuation upside, indicating that the market believes these strategic moves will positively impact the company's intrinsic value.
3. Strong growth in Asia and capital return program: The strong growth in Asia and the capital return program are also expected to enhance revenue growth and boost adjusted earnings per share, which are key drivers of intrinsic value.



Regional Growth Dynamics and Capital Return Program

Regional growth dynamics, particularly in Asia, and the capital return program play a significant role in enhancing Booking Holdings' revenue growth and adjusted earnings per share:

1. Regional Growth Dynamics (Asia): Asia led the regional growth with a remarkable 100% increase in nights booked compared to the previous year. This surge in demand contributed to the overall growth in nights booked and gross bookings (GBV) for the company. The strong performance in Asia is attributed to the continued strength in leisure travel demand and a lengthening booking window, particularly in Europe and the United States. This regional growth in Asia has a direct impact on Booking Holdings' revenue growth, as it contributes to the overall increase in nights booked and GBV.
2. Capital Return Program: The capital return program is expected to enhance revenue growth and boost adjusted earnings per share (EPS) for Booking Holdings. By returning capital to shareholders through dividends and share repurchases, the company can increase its earnings per share by reducing the number of outstanding shares. This capital return program, combined with the strong regional growth in Asia, is expected to drive revenue growth and improve adjusted EPS for the company.

In conclusion, the regional growth dynamics in Asia and the capital return program play a crucial role in enhancing Booking Holdings' revenue growth and adjusted earnings per share. The strong performance in Asia contributes to the overall revenue growth, while the capital return program helps boost adjusted EPS by reducing the number of outstanding shares. The company's strategic initiatives, such as the expansion of merchant capabilities and AI investments, further drive its intrinsic value, leading to a significant discrepancy between its intrinsic value and current share price. Investors may want to consider this undervaluation when evaluating Booking Holdings as a potential investment opportunity.