Is Booking Holdings (BKNG) a Buy Despite Mixed Analyst Signals?

In the ever-evolving travel tech space, Booking Holdings (BKNG) has long been a bellwether for innovation and resilience. As of July 2025, the company sits at a crossroads: Wall Street analysts are overwhelmingly optimistic, but earnings-driven valuation models tell a more nuanced story. This article explores whether BKNG's current valuation justifies the hype or if the stock is overhyped, using the Zacks Rank system and intrinsic value analysis to evaluate its investment potential.

Wall Street's Optimism: A Strong Buy Signal

Booking Holdings has earned a Zacks Rank of #1 (Strong Buy), a rating reserved for companies with robust earnings revisions and a high probability of outperforming estimates. Over the past 30 days, the Zacks Consensus EPS estimate for 2025 has risen by 2.2%, reflecting confidence in the company's ability to deliver 16.13% year-over-year EPS growth and 8.68% revenue growth. Analysts project second-quarter 2025 earnings of $50.46 per share, a 20.43% increase from the same quarter in 2024.

The Zacks Rank system, which has historically delivered +25% average annual returns for #1 stocks, is bolstered by BKNG's consistent earnings outperformance. The company has beaten estimates in four straight quarters by an average of 18.6%, driven by record-breaking performance in its core platforms (Booking.com, Expedia, and Agoda) and the launch of KAYAK.ai, a generative AI tool for personalized travel planning.

Wall Street's enthusiasm is further reflected in the “Moderate Buy” consensus from 32 analysts, with 19 “Buy” ratings and 3 “Strong Buy” ratings. The average 12-month price target of $5,454.26 implies a slight downside from the current price of $5,632.27, but the broad range of targets ($4,200 to $6,100) underscores the uncertainty in forecasting BKNG's trajectory.

Earnings-Driven Valuation: A Mixed Bag

While Wall Street's optimism is compelling, intrinsic value models paint a more complex picture. A Discounted Cash Flow (DCF) analysis using free cash flow (FCF) suggests BKNG is undervalued, with an intrinsic value of $7,877.34 compared to its current price of $5,632.27. This implies a 28.5% margin of safety, a tempting proposition for value investors. The DCF model assumes a 10-year growth period at 20% and a 4% terminal growth rate, discounted at 11% (based on the 10-year Treasury yield and market risk premium).

However, other models contradict this conclusion. The DCF (Growth Exit 5Y) and DCF (EBITDA 5Y) models indicate overvaluation by 1.6% and 21.1%, respectively. The EV/EBITDA model is even more bearish, suggesting the stock is trading 41.1% above intrinsic value. Similarly, the P/E model shows a 6% overvaluation, while the Fair Value model implies a 25.8% premium.

The disparity between these models highlights the sensitivity of valuation to assumptions. The FCF-based DCF relies on BKNG's ability to sustain high growth in free cash flow, which is plausible given its dominance in travel tech. However, models using EBITDA or revenue multiples are less forgiving, as they assume less aggressive cash flow generation and higher capital expenditures.

Contrasting Optimism with Caution

The Zacks Rank and Wall Street's “Moderate Buy” consensus are rooted in short-term earnings momentum, while intrinsic value models focus on long-term cash flow sustainability. This divergence raises a critical question: Is BKNG's current valuation justified by its growth potential, or is the stock overhyped by analysts who are extrapolating recent performance too far?

One key factor is BKNG's strategic initiatives, such as the expansion of alternative accommodations (e.g., vacation rentals) and AI-driven personalization. These innovations could drive long-term value, but they also require significant R&D and marketing spend, which could pressure margins. Additionally, the company's high PEG ratio of 1.74—compared to the industry average of 1.67—suggests investors are paying a premium for its growth prospects.

Another consideration is market volatility. BKNG's beta of 1.15 indicates higher volatility than the S&P 500, which could amplify losses in a downturn. While the Zacks Rank historically outperforms, no model is infallible, and BKNG's current valuation could be vulnerable to a slowdown in travel demand or regulatory scrutiny of its AI tools.

Investment Implications: A Case for Selective Entry

For long-term investors, BKNG's 28.5% undervaluation in the FCF-based DCF model offers a compelling entry point, provided the company can maintain its growth trajectory. The Zacks Rank's historical outperformance and the company's strong earnings revisions further support this view. However, the overvaluation signals from other models suggest caution, particularly for risk-averse investors.

A balanced approach might involve positioning BKNG as a satellite holding in a diversified portfolio, rather than a core investment. Investors should monitor upcoming earnings reports (especially the Q2 2025 results on July 29) and watch for signs of margin compression or slowing user growth. Additionally, the Projected FCF model's 2.82x overvaluation is a red flag that warrants further scrutiny.

Conclusion: A Buy, But With Conditions

Booking Holdings remains a strong buy in the eyes of analysts and the Zacks model, but its valuation is not without risks. The company's innovative edge and consistent earnings outperformance justify optimism, but investors must weigh these positives against the mixed signals from valuation models. For those willing to accept the risks of a volatile stock and bet on BKNG's ability to sustain growth, the current price offers a margin of safety. However, those seeking lower-risk opportunities may prefer to wait for a pullback or a clearer resolution of the valuation debate.

In the end, BKNG's potential as a long-term investment hinges on its ability to balance innovation with profitability—a challenge it has navigated before but one that demands close attention in today's dynamic market.