Booking named Best Idea for 2025 at TD Cowen

Investing.com -- TD Cowen analysts named Booking Holdings (NASDAQ:BKNG) as their best stock idea for 2025, citing a continued runway for share gains and a new cost-efficiency plan.

The firm's analysts highlight that Booking Holdings Inc (NASDAQ:BKNG) is outperforming the industry with an 8% increase in booked nights for the year 2024, notably surpassing competitors like Airbnb.

The firm's positive outlook is also supported by expected margin expansion, attributed to a combination of reduced advertising costs through a higher direct traffic mix and a new three-year efficiency plan that could save the company $400-450 million.

Furthermore, TD Cowen projects a $1 billion per year cash benefit from changes in the merchant mix.

TD Cowen introduced a four-year estimate from 2025 to 2028, predicting 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 firm has set a price target for Booking at $6,300, implying nearly 19% upside from current levels.

“We see continued runway for share gains and, combined with ad leverage, a new cost efficiency plan and repurchases, we expect significant profit growth for foreseeable future,” analysts led by Kevin Kopelman said.

The analysis acknowledges that while investor sentiment on Booking is strong, with its price-to-earnings (P/E) multiple at a premium compared to the S&P 500 for the first time since early 2018, certain aspects of the company's potential remain underappreciated.

These include the fact that Booking's free cash flow (FCF) now significantly exceeds EPS, the company's unique position of increasing direct traffic while reducing advertising costs, and the new cost efficiency plan which is expected to bolster investor confidence in its multi-year profit and market share growth trajectory.

Furthermore, regulatory pressures on Google (NASDAQ:GOOGL) are anticipated to continue to mitigate any perceived threats to Booking's business model. The firm also highlights a strong hotel outlook in Europe, particularly regarding international inbound travel.

Investors and market watchers are advised to look out for upcoming travel industry data, currency impacts, and Booking's fourth-quarter earnings in February for the initial 2025 guidance and updates on the efficiency plan.