On Thursday, TD (TSX:TD) Cowen, a financial services firm, announced an increase in the price target for Booking Holdings (NASDAQ:BKNG), a leader in the online travel industry. The target has been raised to $6,300.00, up from the previous $5,500.00, while maintaining a "Buy" rating on the stock.
The firm has identified Booking Holdings as its "Best Idea for 2025," citing several key factors that contribute to this optimistic outlook. The company is expected to achieve growth that surpasses the industry average, with an 8% increase in booked nights in 2024, a figure that has seen recent acceleration. This growth is partly driven by the Alternative accommodations segment, which is outperforming competitors such as Airbnb (NASDAQ:ABNB) year over year.
TD Cowen also highlighted Booking Holdings' potential for margin expansion, which is likely to stem from reduced advertising costs due to a higher mix of direct traffic and a new three-year efficiency plan projected to save $400-450 million. Additionally, the firm anticipates a $1 billion per year cash benefit resulting from changes in the merchant mix.
The analyst's report includes a four-year estimate for 2025-2028, projecting an EBITDA compound annual growth rate (CAGR) of 11%, earnings per share (EPS) growth of 16%, and free cash flow (FCF) per share increase of 14%. The new price target of $6,300 is based on 25 times the forecasted 2025 free cash flow per share.
Booking Holdings' dominance in the lodging booking sector is further underscored by its expected volume of over 1.1 billion room nights in 2024, which is 30% larger than the combined totals of Airbnb and Expedia (NASDAQ:EXPE). With Alternative accommodations representing 35% of the total and experiencing a 14% increase at Booking.com, the company's largest brand, there is a clear pathway for continued market share gains. Furthermore, through advertising leverage, cost-saving measures, and stock repurchases, TD Cowen expects significant profit growth for Booking Holdings in the foreseeable future.
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