I'm rating Booking Holdings (BKNG) a Buy at approximately $4,300 per share.

The thesis is straightforward. The market has lumped Booking in with the broader "SaaSpocalypse" tech selloff, with this idea that AI agents will disintermediate every software platform and marketplace on the internet. For companies like Monday or even some SaaS players, that fear has at least some logic behind it. But for BKNG? I think the market is confusing theoretical disruption risk with the actual mechanics of how global travel works.

My conviction rests on three pillars.

The bear case goes something like this - generative AI search like Google's AI Overviews, or maybe some future ChatGPT travel agent will let consumers bypass OTAs entirely, routing travelers straight to hotel websites or assembling trips without ever touching BKNG. It's a tidy narrative. And it completely ignores how travel distribution actually works.

Booking's moat is a network of 29+ million accommodation listings - the majority of which are small, independent hotels, B&Bs, and apartments in Europe and Asia that have neither the marketing budget nor the technical capability to reach a global audience on their own. These properties depend on BKNG the way a small retailer depends on Amazon.

No AI chatbot changes that dynamic. If anything, AI tools need inventory providers to function, and Booking controls the largest global accommodation inventory outside of China.

Booking's own $457 million KAYAK impairment in Q3 actually tells you management gets it. They're being realistic about the metasearch model, where customers compare prices across OTAs, being vulnerable to AI search. But the core Booking marketplace, where the company acts as merchant and processes payments? That's a fundamentally different business. The KAYAK write-down is management pruning a weaker branch.

And Booking isn't sitting still. CEO Glenn Fogel emphasized on the Q3 call that the company is "at a moment where advances in AI are just beginning to create new ways that people plan and experience travel." Their Connected Trip product, which bundles accommodations, flights, attractions, and car rentals into a single itinerary, grew transactions over 30% year-over-year in Q3. That's the kind of integrated experience an AI travel agent would need to replicate at scale. Flight bookings were up 32%, attractions nearly 90%.

Booking is becoming the platform that AI tools plug into, not the platform they replace.

There's a disconnect here that I find genuinely surprising, and I’m happy to take advantage.

In Q3 2025 (reported October 28), Booking delivered revenue of $9.01 billion, up 13% year-over-year and 8% on a constant currency basis. That beat the high end of guidance by four percentage points.

Room nights hit 323 million, up 8%.

Gross bookings reached $49.7 billion, up 14%.

Adjusted EBITDA came in at $4.2 billion with a 47% margin - expanding 120 basis points year-over-year.

For the full year 2025, management guided to revenue growth of approximately 12%, adjusted EBITDA growth of 17 - 18%, and adjusted EPS growth above 20%. They've beaten or met guidance in each of the past four quarters.

On the cost side, the Transformation Program is delivering ahead of schedule. Run-rate savings have been raised to $500–$550 million annually, up from prior estimates. That's real structural cost reduction that could be sustainable. Also, personnel expenses grew 9% in Q3, but EBITDA margins still expanded because revenue is growing faster and the company is getting more efficient at the same time.

The cash flow profile is what really sets Booking apart in my view. Trailing twelve-month free cash flow through Q3 was approximately $9.2 billion, and consensus estimates for FY2025 sit around $9.3 billion. For FY2026, analysts expect $10.

So at a $139 billion market cap, you're paying roughly 15x trailing free cash flow and about 13x next year's estimate. For a company growing earnings 15–20% annually with a dominant market position.

That's a pretty damn good bargain and frankly I can’t believe it’s dropped this far.

Not to mention that capital allocation has been outstanding. The company repurchased $6.5 billion in stock during 2024 and has reduced its share count by roughly 35% over the past decade. They're also paying a quarterly dividend of $9.60 per share, which isn't going to move the needle on yield but signals confidence in sustainable cash generation. And they paid down $1.5 billion in high-coupon debt in Q3, reducing interest expense going forward.

Alternative accommodations, which is Booking's answer to Airbnb, now totals 8.6 million listings, up 10% year-over-year, with room nights growing faster than the overall business. The Genius loyalty program has over 30% of active travelers in higher tiers, generating a mid-50% share of room nights. That kind of loyalty stickiness doesn't show up in a P/E multiple, but it absolutely shows up in retention and lifetime value.

Let me walk through the math. I want to be transparent about assumptions so you can stress-test this yourself.

Base Case (60% probability): Estimated FY2026 adjusted EPS: ~$225 (consensus is in the $215–$230 range depending on the source, and Booking has beaten estimates in four consecutive quarters).

Apply a 24–26x forward P/E - below the 3-year average of roughly 31x, and well below the 5-year average. That gives a fair value range of $5,400–$5,850.

From $4,300 where the stock sits currently, that's 26–36% upside.

For context on the multiple, Booking's current forward P/E of approximately 20x represents a meaningful discount to its own history. The 10-year median P/E without non-recurring items is about 25x. I'm not asking for a premium multiple here, just a return toward the low end of the historical range as AI panic subsides.

Bull Case (25% probability): Q4 earnings beat, 2026 guidance comes in strong, and the stock re-rates to 28x forward earnings: $225 × 28 = $6,300.

That's roughly 47% upside and closer to the analyst consensus target of $6,122.

Bear Case (15% probability): Travel demand softens meaningfully in 2026, AI competition accelerates faster than expected, and earnings grow only 8 - 10% instead of 15%.

That gives maybe $200 in FY2026 EPS at an 18x multiple: $3,600. About 16% downside from here.

The risk-reward math here gives us roughly 30% upside in the base case versus 16% downside in the bear case. That's close to 2:1, which clears my threshold for a Buy rating.

Travel demand deceleration

The macro backdrop isn't bulletproof. Consumer spending has held up better than expected, but if we get a meaningful slowdown in Europe, which generates the bulk of Booking's revenue, room night growth could compress to low-single-digits. Management flagged "some uncertainty in the macroeconomic and geopolitical backdrop" on the Q3 call. I'm watching European consumer confidence closely.

AI competitive encroachment for real this time

I've argued the near-term threat is overblown, but I'm not dismissing it entirely. Google is pushing deeper into travel with AI-powered search features, and if they eventually move toward direct booking facilitation (bypassing OTAs), that's a structural threat to customer acquisition costs. The timeline matters a lot here and I think this is a 3–5 year risk, not a 12-month risk, but I could be wrong.

FX headwinds reversing

Booking has benefited from dollar weakness in recent quarters. If the dollar strengthens meaningfully, reported growth will look weaker even if the underlying business is fine. Currency cuts both ways, and it's been a tailwind that could easily become a headwind.

Regulatory risk in Europe

The Digital Markets Act and ongoing EU competition scrutiny could impose constraints on how Booking operates in its largest market. Rate parity rules, data sharing requirements, and platform regulation are all live issues that add friction and compliance cost.

Q4 earnings are the immediate catalyst. Consensus expects $47.58 in adjusted EPS on $6.11 billion in revenue. I'm watching three things specifically:

First, room night growth. Management guided 4–6% for Q4. If they deliver above the high end, it signals demand is accelerating into 2026.

Second, 2026 full-year guidance. The market needs to hear that double-digit earnings growth is sustainable. If management guides to 12–15% EPS growth, the stock re-rates.

Third, buyback pace. At these prices, aggressive repurchases would be an unambiguous signal of management conviction. They've got the balance sheet for it.

I'd also listen carefully for any commentary on AI integration progress and specifically Connected Trip adoption rates and the conversion lift from GenAI features. The more concrete data points Fogel can provide, the faster the "AI is a threat" narrative unravels.

I rate Booking Holdings a Buy with a fair value estimate of $5,400–$5,800 over the next 12 months. The stock is trading at roughly 20x forward earnings and 13x next year's free cash flow for a business that's growing 15–20% annually, has beaten estimates four quarters running, and is returning billions to shareholders.

The AI fear is creating a gift for patient investors.

Booking's moat is built on millions of supplier relationships, a loyalty flywheel with 30% penetration, and a payments infrastructure that took over a decade to build. An AI chatbot doesn't replicate that overnight. Or in a year. Or probably in five.

If Q4 confirms the growth trajectory, I think $5,000 by mid-2026 is the base case.

But we shall see!

The Earnout Investor provides analysis and research but DOES NOT provide individual financial advice. Jamie Dejter may have a position in some of the stocks mentioned. All content is for informational purposes only. The Earnout Investor is not a registered investment, legal, or tax advisor, or a broker/dealer. Trading any asset involves risk and could result in significant capital losses. Please, do your own research before acquiring stocks.