Booking Holdings (BKNG): A Mispriced Growth Story Ahead of Q2 Earnings

In the shadow of post-pandemic volatility, Booking Holdings (BKNG) has emerged as a paradox: a high-growth tech-driven travel giant trading at a valuation that suggests skepticism about its future. But with a Zacks #2 Buy rating, a robust upcoming earnings report, and a PEG ratio signaling undervaluation relative to its peers, investors may be overlooking a compelling opportunity. Let's dissect whether the dip presents a buying catalyst or if fears of overvaluation are justified.

Valuation Metrics: Growth vs. Price

Booking's Forward P/E of 26.47 slightly exceeds the Travel & Leisure industry average of 23.58, but its PEG ratio of 1.14 (calculated by dividing its Forward P/E by its 5-year EBITDA growth rate of 27.10%) is below the sector's median PEG of . This suggests the stock is priced to deliver growth that aligns with its fundamentals. For context, competitors like Airbnb (ABNB) trade at a Forward P/E of 34.06**, yet lack the same clarity in growth visibility.

Earnings Catalyst: July 29 Report Could Ignite a Revaluation

The company's upcoming Q2 2025 earnings on July 29 are a critical inflection point. Analysts project a 19.21% year-over-year EPS jump to $49.95, driven by AI-enhanced sales in air tickets and alternative accommodations. Revenue is expected to rise 11.62% to $6.54 billion, with EBITDA growth of 16% reflecting margin resilience. If results meet or exceed these estimates, BKNG could see a valuation rerating—especially as its average price target of $4,062.89 (a 7.43% upside from recent levels) hints at analyst optimism.

Historical data supports this outlook: when BKNG has beaten earnings expectations since 2022, the stock delivered a 63.6% win rate over the following 3 days (45.5% at 10 days but rebounding to 63.6% at 30 days), with a maximum gain of 2.41% at day 48. This consistency post-positive surprises underscores the potential for sustained momentum following a strong report.

Why the Dip Is a Buying Opportunity

1. PEG Mispricing: BKNG's PEG of 1.14 sits in a sweet spot—below its fair P/E of 36.2x (as per analysts) and comfortably under the sector's growth multiple. This implies the stock is undervalued relative to its 15.6% projected 2025 EPS growth.
2. Zacks #2 Buy Momentum: The Zacks Rank, which emphasizes short-term catalysts, underscores the stock's favorability. Over the past 60 days, FY 2025 EPS estimates have been raised by $4.43, signaling improving sentiment.
3. Strong Cash Position: With $6.7 billion in cash, BKNG can fund acquisitions, share buybacks, or weather macro headwinds—a critical buffer in uncertain markets.

Risks, But Manageable

• Debt and Equity: BKNG's $16.5 billion debt and negative equity are red flags, but its $25.66 billion annual revenue and strong cash flow provide liquidity. The debt-to-equity ratio, while elevated, is a sector-wide issue, not a BKNG-specific flaw.
• Currency Volatility: Exposure to emerging markets (e.g., Brazil, Mexico) could pressure margins, but the company's geographic diversification mitigates single-market risks.
• Airbnb Competition: ABNB's aggressive pricing and inventory expansion remain a threat, though BKNG's AI-driven platforms and brand loyalty offer a counterbalance.

Conclusion: A Buying Opportunity Ahead of Earnings

Booking Holdings' valuation appears misaligned with its growth trajectory. With a PEG ratio suggesting undervaluation, a Zacks #2 Buy rating, and a Q2 earnings report poised to affirm its AI-fueled growth, the dip below $3,700 is a strategic entry point. Analysts' $4,062.89 price target and the 15.6% 2025 EPS growth forecast argue for a revaluation post-earnings. While risks exist, the catalysts outweigh them for investors with a 6–12-month horizon.

Investment Thesis: Accumulate BKNG on dips ahead of the July 29 report. Set a stop-loss below $3,500 and aim for the $4,200 level if Q2 results exceed expectations. For the long term, the stock's AI-driven innovation and global scale position it to dominate the $2.2 trillion travel tech market.