Value Investing with Sven Carlin, Ph.D. on $BKNG (Oct 30, 2026)
Although Booking looks cheap — P/E 18, EPS up 15% on buybacks, an 8.3% free-cash-flow return implying roughly 13% conservatively, high single- to low/mid-double-digit growth — the stock is down 24-28% from its August peak. AI may pressure margins without destroying the business, and platform fee disruption plus a travel slump add risk; the risk/reward is not attractive enough for the speaker.
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What is my opinion of Booking.com? The stock has fallen 24% since its peak in August. Growth is slowing, and there are concerns about artificial intelligence, but underlying activity may be strong. Good returns now, and share buybacks.
Looking at the company, the stock has now fallen by 28%. The price-to-earnings ratio is 18, the dividend yield is 1%, and if we look at the underlying activity over the past twelve months, everything is still growing.
The profit margin before interest, taxes, depreciation and amortization is growing, and everything is improving. Revenue increased by 8%, net income increased by 8%, and diluted earnings per share due to share buybacks increased by 15%.
That's double-digit growth with a price-to-earnings ratio of 18. That's insanely cheap. The return on capital is 4 billion, which is the highest quarterly return in history. We can see good cash flows here.
Now, if we compare the cash flows here to the market value, it looks really good, especially when compared to the growth. The guidance remains in place, high single-digit to low and mid-double double-digit growth, as they do a lot of share buybacks, even more than free cash flow. So, everything looks good.
Global travel is stable and growing slightly. With other factors remaining constant, it will grow more. Keep in mind that everyone in Croatia complains about the ever-increasing prices when they come for holidays, but there is high demand, inflation, prices are rising, and Booking.com, as a fee-based business, is reaping more and more of this inflation.
So, the platform's fees are great, the structure is great, and it's easy to use; everything looks excellent. But why did the stock price drop?
Also, if we compare the free cash flow, we find a free cash flow return of 8.3%. If this ratio grows at a rate between low and medium double digits, i.e. 12% plus 1% dividend payouts, then even in the most conservative scenario, you are looking at a return on investment of 13%.
Then we move on to artificial intelligence, and I first ask my friend "DeepSec". And I don't pay for DeepSec; it gives me better answers than Google, which I pay $200 a month or more for the premium version, which is crazy.
Yes, the disorder exists. It will have an impact. It will not be total destruction, but it may lead to a problem with profit margins, not disappearance. A similar answer from "Gemini" is not as direct or explicit as "DeepSec".
And when I compare the details with other situations, it is also very interesting. That's all. That's the bottom line. It's not a disaster, so if things stay the same, Booking.com can continue for the next few years.
This is just a personal feeling of mine. The 15% figure could drop a little if we face a slump in travel. Who knows, there are other factors outside of what seems great right now, a bad year or something like that.
This creates a risk, especially since artificial intelligence is a powerful technology. This is a technology-based business.
Therefore, the fees charged by Booking.com, from 10% to 15% or 20%, depend on your position on Booking.com's list. Since I'm from here, and everyone here owns these apartments, we're all part of the rental economy.
Just a note, Jamaica and Singapore have decided to focus on education. The same thing is happening in Croatia, but it's a long story. However, the 10, 15 or 20% fees charged by Booking.com are less than the 40% that other operators used to charge in the past.
They were disturbed by "Booking". And now, there is still 5% or 10% that may go to other platforms in the world. Therefore, there is still room for disruption, which makes the situation risky. Not destruction, but this is a great example.
When that happens, Booking.com's stock will have already dropped another 50%. If that doesn't happen, it may continue on its current path, but for me, the risk and reward are not attractive enough.
Everything is possible, yes, but technology exists to be disrupted by new technology. Booking technology is an old technology; it is prone to disruption. It may happen, and it may not.
Nobody knows yet, but it's just a risk I wouldn't take.