Hello there, welcome back to Business Investors. Today, we're discussing a top stock for 2024, which I've invested in for the very long term. I'm quite optimistic about its potential and look forward to watching this company grow over the years, requiring little effort on my part. Let's delve into Booking. First off, I want to show you that I've personally invested in Booking, currently holding a substantial position.
Why I’m buying stocks of Booking Holdings for the long-term
I initially bought shares at a favorable price, and so far, my investment has increased by 15%. My initial analysis was promising, but since then, the valuation has risen, making it slightly less attractive. As part of the Happy Investors community, which I founded, we focus on strategic investment and stock analysis, primarily for Dutch investors. For instance, one of our members, Beno, was pleased with the growth stock pick for December.
I also invested in our growth stock pick for January, StoneCo, but more on that in a future video. I present my analysis on a paid platform to Dutch investors. For instance, let's take a look at our Happy Value Stocks from December 2023, where I analyzed Booking Holdings, also known as Priceline Group. The company, owning various subsidiaries like rental cars, Agoda.com, and Kayak.com, focuses on travel and leisure.
The reasons to buy included robust growth and strong cash flow. However, the price-to-cash flow ratio, previously estimated at 17, has increased due to the stock price rise. This means Booking has become slightly more expensive. It's important to stay updated with Business Investors for real-time updates on stocks like StoneCo.
Using tools like Seeking Alpha, we see promising growth scenarios for Booking. We estimate a significant EBIT growth of 44%, highlighting Booking's high return on investment equity. The company's profitability is impressive, with a strong net income, thanks to its effective business model. I plan to hold my Booking shares for five to ten years, and if the price drops below fair value, I'll likely increase my holdings.
Despite a higher valuation now compared to December, Booking remains an attractive long-term investment. This is underscored by its high return on equity and total capital. The stock price is somewhat above the normal P/E ratio, but with analysts predicting earnings growth, Booking's strong historical growth rate suggests it remains a resilient company with a sustainable competitive advantage.
However, comparing its current P/E ratio with the growth rate, the total annual return might appear modest. But considering Booking's usual multiple, and if it can meet earnings estimates, the annual return could be more significant. For those wary of paying a premium, a more cautious P/E ratio might be more appealing.
In the short term, the consensus is to hold, as there might be a better entry point in the future. Looking at trade views, while the stock is in a positive trend, waiting for a price drop could be wise. However, considering its long-term prospects, even at a high price, Booking remains a viable investment, though it may be challenging for some to invest significantly due to its high share price.
In conclusion, my analysis and personal investment in Booking reflect its potential as a great long-term opportunity for investors. While the actual intrinsic value might be uncertain, even at a P/E ratio of 20, it remains a buy. I'm hopeful for a short-term price drop to increase my holdings. Stay tuned for more updates on stocks I'm investing in and insights on Booking's long-term potential.
About the best long-term stock: Booking Holdings
Booking Holdings Inc., formerly known as Priceline Group, operates a business model centered around online travel reservations and related services. The company is one of the world’s leading providers of travel services and operates through various well-known brands. Here are the key aspects of Booking Holdings’ business model:
Online Travel Agency (OTA) Services: Booking Holdings is primarily known for its OTA services. It operates through several popular websites, including Booking.com, Priceline.com, Agoda.com, and Kayak.com. These platforms allow customers to book a wide range of travel-related services, including hotel rooms, airline tickets, car rentals, and vacation packages.
Accommodation Reservations: A significant portion of the company's revenue comes from accommodation bookings. Booking.com, one of its flagship websites, is known for offering a wide variety of accommodation options, from hotels to apartments, vacation homes, and more. The platform operates on a commission-based model, where Booking Holdings earns a percentage of the value of each reservation made through its sites.
Price Comparison and Metasearch: Kayak.com and other metasearch engines under Booking Holdings allow customers to compare prices for various travel services, including flights, hotels, and car rentals, across different providers. This service drives traffic to OTA websites and generates revenue through referral fees and advertising.
Ancillary Services: Booking Holdings also earns revenue through ancillary services such as travel insurance, airport taxis, and restaurant reservations. These services provide additional value to customers and create more revenue streams for the company.
Global Reach with Localized Services: The company operates globally, offering services in multiple languages and catering to various local preferences and regulations. This global reach, combined with localized content and customer service, makes it a popular choice for travelers worldwide.
Technology and User Experience: A significant focus of Booking Holdings is on leveraging technology to enhance the user experience. The company invests in mobile technology, user-friendly websites, and advanced algorithms to personalize user experiences and optimize pricing strategies.
Strategic Acquisitions and Partnerships: Booking Holdings has expanded its portfolio and enhanced its service offerings through strategic acquisitions. For instance, the acquisition of Rentalcars.com expanded its presence in the car rental market, and OpenTable has positioned the company in the restaurant reservation space.
Diverse Revenue Streams and Flexibility: The business model of Booking Holdings is designed to adapt to changing market conditions and consumer preferences. This flexibility has allowed the company to navigate various challenges, including those posed by the COVID-19 pandemic.
Revenue Model: The primary revenue model for Booking Holdings is a mix of commission-based earnings from bookings made through its platforms, and advertising revenue from its metasearch engines. The commission rates vary depending on the type of service and the agreement with service providers.
Overall, Booking Holdings' business model is built around a diverse portfolio of travel services, a strong online presence, strategic acquisitions, and a focus on technology and customer experience. This model has allowed the company to become a leading player in the global online travel market.