How Booking Holdings Stock Can Fall 40%?
Booking Holdings’ stock (NASDAQ: BKNG) has surged about 50% over the past year, fueled by robust top-line growth, AI-driven innovation, and a highly diversified international footprint. Yet, at a lofty 38.5x trailing earnings, it’s worth asking: how much of this valuation is rooted in fundamentals, and how much rests on lofty expectations?
History shows that steep drops are not unthinkable. In 2022, BKNG tumbled 40% in just a few quarters, and during the pandemic, it shed 45% of its value. With shares now around $5,640, a retreat to the $3,400 range wouldn’t be unprecedented.
The latest quarter highlighted this fragility. Demand momentum and operational efficiency were evident, but net profit plunged 41% year-over-year. Sluggish U.S. consumer sentiment, currency volatility, geopolitical risks, and a stretched valuation leave the stock looking vulnerable. And while Booking’s reliance on international markets (nearly 90% of revenue) shields it somewhat from U.S.-centric pressures faced by Airbnb (NASDAQ: ABNB), it is hardly immune to global macro turbulence.
Image by Edeltravel_ from Pixabay
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Valuation Rests on AI Hope
Booking is leaning heavily into artificial intelligence, rolling out the AI Trip Planner and Priceline’s “Penny” assistant to personalize travel and boost conversions. AI is now embedded across Booking.com, Agoda, Kayak, Priceline, and OpenTable, with development accelerated by partnerships with OpenAI and Microsoft.
The early payoff is tangible: $150 million in expected savings this year, scaling to as much as $450 million by 2027, faster case resolution at Agoda, higher customer satisfaction from voice-enabled agents, and a 40% year-over-year jump in connected-trip bookings in the recent Q2. The flywheel is clear—more users generate more data, which sharpens AI models and strengthens Booking’s competitive moat.
That explains the premium. Unlike asset-heavy airlines and hotels, Booking operates a capital-light marketplace with EBITDA margins in the mid-30s, converting growth efficiently into free cash flow. Investors are paying up—about 25x forward earnings versus 14x for Expedia (NASDAQ: EXPE)—betting AI-driven personalization and integration will fuel durable growth. Separately see Figma Stock Downside To $40
AI Spending Sustainability
Still, the AI story comes with risks. Building a seamless “digital travel assistant” is technically complex, requiring real-time integration of inventory, pricing, and preferences. If initiatives like the AI Trip Planner, Penny, or Connected Trip fall short, adoption may stall. Dependence on partners such as OpenAI, Microsoft, and Amazon also introduces vendor concentration risk, while rivals like Expedia, Airbnb, and Google Travel are racing to deploy their own AI platforms with broader ecosystems.
Consumer trust is another challenge. Travelers may hesitate to rely on algorithms for high-cost, complex bookings, and errors, bias, or lack of transparency could slow uptake. Moreover, AI offers no protection from recessions, geopolitical shocks, or currency swings that weigh on travel demand. With much of BKNG’s valuation premium tied to AI optimism, the key question is whether these tools deliver measurable earnings growth—or remain more narrative than reality.
See our analysis on BKNG Valuation for more details on what’s driving our price estimate for the stock.
How Resilient Is BKNG Stock During A Downturn?
BKNG saw an impact slightly worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and (b) how quickly it recovered. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read BKNG Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
Inflation Shock (2022)
- BKNG stock fell 39.5% from a high of $2,703.26 on 16 February 2022 to $1,634.61 on 11 October 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 2 May 2023
- Since then, the stock increased to a high of $5,815.92 on 7 July 2025 , and currently trades at $5,639.78
Covid Pandemic (2020)
- BKNG stock fell 44.8% from a high of $2,086.90 on 10 January 2020 to $1,152.24 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 9 November 2020
Global Financial Crisis (2008)
- BKNG stock fell 66.3% from a high of $139.66 on 13 May 2008 to $47.07 on 6 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 10 August 2009
Premium Valuation
In summary, it also doesn’t help that BKNG stock is still expensive; it trades at almost 39x trailing earnings and 25x forward earnings. Sure, Booking Holdings’ Revenues have grown considerably over recent years, rising at an average rate of about 20% over the last 3 years (vs. 5% for S&P 500). However, this growth could fade quickly if the economy takes a turn for the worse and if the company fails to meaningfully capture a share of the AI market. At current multiples, even modest disappointments could trigger an outsized correction in the stock.
The rich valuation of BKNG stock limits its upside potential in the near-to-mid term. As an alternative, the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
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