When a company announces a stock split, it doesn't change any of the underlying fundamentals of the business. However, it can signal that management is confident in the continued growth of its stock price.
More often than not, management is right. Since 2010, stocks returned an average of 18.3% in the 12 months following a split announcement versus an average of just 13.3% for the S&P 500 in that period, according to data from Bank of America, Bloomberg, and Global Financial Data.
One company has seen the opposite happen since announcing its plan to split its shares earlier this month. Booking Holdings (BKNG 1.38%) shares are down more than 5% since its 25-to-1 stock split announcement on Feb. 18. Here's what's weighing down the share price and why it may be an unbelievable opportunity for investors right now.
Image source: Getty Images.
Is artificial intelligence a friend or foe?
An artificial intelligence (AI) chatbot can be a great travel companion. From helping you plan an itinerary for your travel destination to translating idioms and phrases, it can be an incredibly useful tool. Many investors see the potential for AI tools to completely disrupt Booking's main business: booking flights, accommodations, and travel experiences. That's sent the stock lower in recent months.
But Booking holds a couple of major advantages that won't allow it to be disrupted so easily, and it's working to integrate generative AI within its platform.
First and foremost, Booking has a massive worldwide network of hotels and vacation rentals. It counted 4.4 million properties across 220 countries and territories on its platform at the end of 2025. That includes a lot of independently operated boutique hotels, which rely on Booking and other online travel agencies for marketing and booking management. Replicating its network isn't easy, as it requires time to onboard and set up new listings.
Booking also offers a growing network of non-accommodation services, including flights, rental cars and ground transportation, tours, and activities. Its OpenTable platform offers restaurant reservations in the United States as well. All of that comes together in its Connected Trip strategy, which aims to seamlessly integrate booking multiple parts of a trip. Connected Trip transactions, when a customer books more than one part of a trip with Booking's platforms, increased in the high 20% range last year. That shows growing customer loyalty and strong horizontal integration from Booking.
That's increasingly important as AI becomes more popular and more capable. Booking has a significant data advantage, with decades of customer data and growing volumes of information volunteered by boutique hotels and vacation rental operators. As a result, it has the opportunity to deliver a better AI-driven experience than companies that try to help users plan travel without that first-party data. Booking's AI efforts are still early, but it laid the groundwork in 2025 with tools to help customers discover and plan trips using natural-language search.
NASDAQ: BKNG
Key Data Points
The stock is an absolute bargain right now
While investors fret about the potential impact of AI chatbots on Booking's business, the company is currently delivering excellent financial results. Its annual revenue climbed 13% in 2025, driven by an 8% increase in room nights. Moreover, its cost-cutting program, enacted in November 2024, is delivering results, driving strong bottom-line growth of 20% for the year. It's also using excess capital to buy back shares, which resulted in earnings-per-share growth of 22%.
Management expects the cost savings to continue improving in 2026. But it's planning to invest those savings into growth initiatives such as generative AI, Connected Trips, Asia, and expanding its OpenTable platform internationally. Even so, it expects earnings before interest, taxes, depreciation, and amortization (EBITDA) margin to expand by roughly 50 basis points for the year.
With the core business continuing to deliver double-digit gross bookings growth, Booking should be able to achieve similar revenue growth. Combined with its expanding margin and share repurchase program, management expects 15% earnings-per-share growth.
That makes its current forward P/E ratio of close to 14 look unbelievably cheap. At this price, investors must expect a complete collapse in earnings power. Even if competitors roll out new travel tools centered on their generative AI capabilities, Booking's massive data advantage, supply-side network, and brand names should protect it from a significant decline in its earnings power. Management is maintaining its long-term outlook of 15% earnings-per-share growth. With its PEG ratio (price/earnings-to-growth rate) at less than 1, right now is an excellent opportunity for investors to buy shares in the company.
