Benchmark has upgraded Booking Holdings (NASDAQ:BKNG) to Buy from Hold, setting a new price target of $4,700 per share.
Despite current economic concerns and high investor expectations, Benchmark's analysts believe the company's increasing resilience in EMEA, coupled with strong growth in APAC and LatAm, will enable it to outperform consensus over the next 18 months.
"Our prior rating was inconsistent with our long-term view," Benchmark notes, highlighting their confidence in Booking's ability to gain market share and achieve better-than-expected performance.
The analysts see no near-term derailment of the share gain story and anticipate further inroads in North America over the medium term. The new price target represents 20x the estimated 2025 cash EPS of $235 or 16x adjusted EBITDA.
Benchmark acknowledges that the timing of this upgrade may seem questionable given ongoing economic worries and anecdotal signs of trading down in key European markets.
However, they believe that prior guidance appears conservative across the board. They project a 7% room-night growth, which is above the high-end of the street's guidance at 6%. They also foresee lodging ADR tailwinds in EMEA, which should drive gross bookings and potentially increase EBITDA.
Even so, they "suspect a decent amount of optimism is already baked into the stock."
Benchmark's forecast for gross bookings is approximately $2.5 billion above street estimates, driven by anticipated acceleration in room-night growth. They also highlight potential benefits from the Genius loyalty program and AI-driven improvements, although these are seen as longer-term drivers.
"We also note that Booking was the only major travel company to call out
changes in the booking window last quarter, a phenomenon which has been cited with at least some incremental frequency, although we do not anticipate any major headwinds if that narrative were to continue/increase," wrote the firm.
This strategic upgrade reflects Benchmark's belief in Booking's solid fundamentals and its ability to leverage market opportunities despite economic uncertainties.