1 Reason I'd Buy Booking Holdings Stock and Never Sell

Booking Holdings (NASDAQ: BKNG) is the largest travel company in the world, and it's not even that close. The company -- which owns Priceline, Kayak, OpenTable, Agoda, Rentalcars.com, and Booking.com -- has a market cap of about $138 billion, which dwarfs second-place Marriott International at $95 billion.

Among its online travel stock competitors, it tops Airbnb, which has a market cap of $83 billion.

Booking stock has been a solid performer over the years. Over the past five years, it has returned about 12% per year, and over the past 10 years, it has returned roughly 13% per year -- roughly on par with the S&P 500.

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Booking stock has struggled this year, down about 17% as geopolitical conflicts and higher gas prices have impacted travel plans. In addition, there are lingering concerns about artificial intelligence (AI) bots replacing the usefulness of travel sites like Booking.

But these are not reasons to sell Booking stock. In fact, it is a great time to buy Booking stock and hold on to it. Here's why.

Booking is a bargain

Booking released first-quarter earnings on April 28 after the market closed, and it was a strong quarter. Revenue jumped 16% year over year, bookings rose 15%, and room-nights jumped 6%.

However, the stock was moving about 6% lower in after-hours trading Tuesday, mainly due to projected lower growth rates in Q2 related primarily to the conflict in the Middle East.

But this makes for an even better opportunity to buy this market leader on the dip. Booking stock is trading at just 16 times forward earnings, near its lowest level in a decade.

Plus, its P/E-to-growth, or PEG, ratio, which looks at its valuation five years out relative to its expected earnings, makes it a screaming value. Booking's five-year PEG ratio is 0.73. A PEG ratio below 1 suggests it is undervalued; a PEG ratio as low as 0.73 means it is significantly undervalued relative to its long-term earnings power.

Buy the dip on Booking

This is the major reason I'd buy Booking stock right now and hold on to it. To get shares of the most dominant player in its market at a rock-bottom price is hard to pass up. The concerns about travel are a short-term phenomenon that will subside. In its guidance, Booking anticipates travel rates to bounce back in the second half of the year.

Also, the worries about AI devouring online travel sites may not actually pan out. In fact, several Wall Street analysts, including Morgan Stanley, say AI will help, not hurt Booking, as it will direct travel searches to Booking and other travel sites, leading to higher conversions.

Also, Booking just underwent a 25-for-1 stock split. Booking stock had been trading at an astronomical price of more than $4,000 per share. Now, after the April split, it is down to about $176 per share, making it accessible to more investors.

Wall Street is bullish on Booking stock, with 83% of analysts rating it as a buy. It has a median price target of $235 per share, which suggests 32% upside. Don't worry about the short-term noise; Booking is a long-term value.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Airbnb and Booking Holdings. The Motley Fool recommends Marriott International. The Motley Fool has a disclosure policy.