Booking Holdings Inc. (BKNG): A Tollbooth on Global Travel Growthgciadmin
The financial characteristics of the business are fantastic. The balance sheet is pristine with over $4B in net cash and investments, EBITDA margins are just under 40%, and the company is producing more cash than it knows what to do with (buying back 10% of the share base and looking for M&A opportunities).
The economic moat is considerable. In some of these network-based moats, if suppliers are large and powerful enough, they can put pressure on a network platform before it gains too much power. Think Disney pulling its content from Netflix or the record labels forcing pricing concessions on Spotify. The main question we must ask ourselves is will the network reach critical mass before that happens? We argue that BKNG has already reached that critical mass where service providers can’t ignore it. This is evidenced by their stable pricing, margins and market share. Travelers naturally gravitate to the platforms offering the most choices and best deals, and suppliers want to go where the travelers are.
If that wasn’t enough, BKNG also participates in one of the best secular growth stories around – increased global online travel spending. As global GDP continues to grow, poor countries continue to get richer, and Millennials continue to prioritize experiences over material goods, it hard to see how this trend changes.
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