Second quarter broadly exceeded expectations, but forward guidance is under pressure; maintain Neutral and raise target price to $225

Overview

The report believes that Booking Holdings demonstrated strong execution amid macroeconomic and geopolitical uncertainty. In the second quarter, domestic and intra-regional travel demand drove gross bookings, room nights, revenue, and adjusted EBITDA all above expectations; Connected Trip, the Genius loyalty program, AI services, and the cost transformation plan continued to make progress. However, the Middle East conflict caused airfare increases, capacity declines, and weaker long-haul international travel demand, putting pressure on third-quarter guidance and full-year forecasts.

Core views

In the short term, investor focus will center on booking volatility caused by the Middle East conflict, the slowdown in the airline ticket business, and rising marketing expense ratios. Over the long term, the company’s strategy of increasing share of the travel wallet and direct customer connections through Connected Trip, airline tickets, alternative accommodations, payments platforms, and AI tools still has potential. Goldman Sachs recognizes management’s continued execution, cost efficiency, and capital return capabilities, but believes the impact of AI on online travel platform traffic entry points, organic search pressure, and intensified competition still need to be monitored, and therefore maintains a Neutral rating.

Analysis framework

The report combines actual second-quarter results with company guidance to analyze the upside surprise, assesses domestic and cross-regional demand, marketing investment, cost transformation, AI initiatives, and capital allocation, and accordingly lowers some earnings forecasts for the third quarter and 2026 to 2028. The target price is calculated with equal weighting between an enterprise value multiple approach and a modified discounted cash flow approach.

Methodology notes

• Earnings analysisComparison of actual results, market expectations, and company guidance

  Earnings beat and differences in forward guidance

  Compares actual results for gross bookings, room nights, revenue, and adjusted EBITDA with Goldman Sachs forecasts, consensus expectations, and the upper end of company guidance, while adjusting future forecasts based on management guidance for the third quarter.

• Valuation methodsEqually weighted blended valuation of enterprise value multiples and modified discounted cash flow

  Two valuation methods each account for half

  The first component applies 14.0x EV/GAAP EBITDA to the forecast for one year after the next twelve months; the second component applies 16.0x EV/FCF-SBC to the forecast for four years after the next twelve months and discounts it back three years at a 12% discount rate.

• Capital asset pricingCapital asset pricing model discount rate

  Determining the discount rate using the risk-free rate, beta, and equity risk premium

  The 12% discount rate is based on an approximately 3% risk-free rate, an average beta of approximately 1.3 for covered companies, and a 7% equity risk premium.

• Factor analysisGoldman Sachs factor profile

  Standardized rankings of growth, financial returns, valuation multiples, and composite factors

  The growth factor references forward revenue, EBITDA, and EPS growth; financial returns reference forward ROE, ROCE, and CROCI; valuation multiples reference metrics such as P/E, EV/EBITDA, and EV/FCF. The report text does not provide specific factor percentiles for Booking Holdings.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Booking Holdings Inc. (BKNG.US)

  U.S.-listed stock directly covered by the report

  Strengths

  Leading scale as a global online travel platform, with resilient domestic and intra-regional travel demand; continued progress in Connected Trip, Genius loyalty, alternative accommodations, payments, and AI initiatives; cost transformation and large-scale share repurchases support earnings and per-share value.

  Weaknesses

  The airline ticket business and long-haul international demand are relatively sensitive to geopolitical and capacity changes, marketing expenses are growing faster than gross bookings, and recent revenue and booking forecasts have been lowered.

  Comparison

  The report does not provide specific operating metric comparisons with peers; the Neutral rating is based on its expected total return relative to Goldman Sachs’ internet stock coverage group.

  Risks

  Weakening macro consumption, changes in market share in North America or Europe, generative AI intensifying competition for travel traffic entry points, rising marketing investment, Connected Trip investment returns falling short of expectations, and a slowdown in capital returns.

Key data

• 12-month target price$225.00Previously $215.
• Share price used in the report$194.27Corresponds to 15.8% potential upside to the target price.
• Market capitalization$158.1bnKey data on the report front page.
• Enterprise value$163.1bnKey data on the report front page.
• Second-quarter share repurchasesapproximately $3.7bnApproximately $14.5 billion remains under the existing repurchase authorization.
• Annual recurring cost savings targetapproximately $650mnPreviously approximately $550 million; the additional approximately $100 million is mainly expected to be realized in 2027.
• Third-quarter gross bookings forecast$52.07bnPrevious forecast was $53.38 billion.
• Third-quarter revenue forecast$9.52bnPrevious forecast was $9.69 billion.
• 2026 revenue forecast$29.20bnPrevious forecast was $29.30 billion.
• 2026 adjusted EBITDA forecast$10.78bnPrevious forecast was $10.86 billion.
• 2026 GAAP EPS forecast$10.58Previous forecast was $10.69.
• 2026 expected P/E ratio18.4xExpected to decline to 16.0x and 14.0x in 2027 and 2028, respectively.

Impact & implications

The second-quarter earnings beat and the raised cost savings target reinforced the company’s execution capability and margin improvement thesis, while continued buybacks also support per-share value. However, reductions to third-quarter and full-year forecasts indicate that near-term fundamentals may still fluctuate. The raised target price reflects improved rolling forecasts and valuation results, but the maintained Neutral rating means Goldman Sachs believes the current valuation already reflects long-term growth opportunities to some extent, and investment returns still depend on easing geopolitical pressure, execution of the AI strategy, and improved marketing efficiency.

Risks

• The Middle East conflict may continue to push up airfares, compress flight capacity, and weaken long-haul international travel demand.
• Macroeconomic weakness may weigh on consumer discretionary spending, causing bookings and revenue to fall below the base forecast.
• Changes in market share in North America or Europe may cause booking and revenue growth to deviate from expectations.
• Generative AI and intensified competition across the online travel value chain may require the company to increase marketing investment and pressure margins.
• If returns on Connected Trip and related strategic investments are insufficient, they may fail to improve the future revenue and adjusted EBITDA trajectory.
• A slowdown in share repurchases or a long-term lack of capital returns may create valuation pressure.

What to watch

• Whether third-quarter gross bookings and revenue can meet the lowered forecasts.
• The pace of recovery in the Middle East situation, flight capacity, airfare, and long-haul international travel demand.
• Whether growth in U.S. room nights and Asia domestic room nights can continue.
• Marketing expenses as a percentage of gross bookings and changes in traffic mix.
• The pace of achieving the approximately $650 million annual cost savings target, especially the incremental savings in 2027.
• The impact of Booking.com’s AI discovery experience, Priceline’s Penny assistant, and voice customer service on conversion rates and unit costs.
• Connected Trip transaction penetration, the share of high-tier Genius members, repurchase execution, and use of remaining authorization.