TD Cowen's Top Stock Idea for 2025: Booking Holdings

TD Cowen analysts have named Booking Holdings (NASDAQ: BKNG) as their top stock pick for 2025, highlighting the company's potential for share gains and a newly introduced cost-efficiency plan.

The analysts noted that Booking Holdings is outperforming the industry with an 8% increase in booked nights for 2024, significantly outpacing competitors such as Airbnb.

Positive Outlook

The positive forecast includes expected margin expansion due to decreased advertising costs facilitated by a greater mix of direct traffic. The company’s three-year efficiency plan can potentially save $400-450 million.

TD Cowen also anticipates a $1 billion annual cash benefit stemming from the alteration in the merchant mix.

Long-Term Estimates

The firm has introduced a four-year financial estimate from 2025 to 2028, forecasting:
– EBITDA CAGR of 11%
– EPS growth of 16%
– FCF per share increase of 14%

The price target for Booking Holdings is set at $6,300, implying nearly 19% upside from current levels.

Analyst Insights

Kevin Kopelman, leading the analysts’ team, stated, “We see continued runway for share gains. Combined with advertising leverage, a new cost-efficiency plan, and repurchases, we expect significant profit growth for the foreseeable future.”

While investor sentiment remains strong, with a premium price-to-earnings (P/E) multiple compared to the S&P 500, some aspects of Booking's potential still appear underappreciated. These include:
– FCF exceeding EPS significantly
– Unique position of increasing direct traffic while lowering advertising costs
– New cost efficiency plan aimed at boosting investor confidence in profit and market share growth.

Regulatory and Market Considerations

Regulatory challenges facing Google (NASDAQ: GOOGL) are expected to further diminish risks to Booking's business model. Additionally, analysts emphasize a robust hotel outlook in Europe, especially in relation to international inbound travel.

What to Watch For

Investors should keep an eye on upcoming travel industry data, currency fluctuations, and Booking's fourth-quarter earnings in February, which will provide initial guidance for 2025 along with updates on the efficiency plan.