two people walk a paved city street towing luggage
When it comes to talking about artificial intelligence (AI), Microsoft often dominates the conversation, and rightly so. Early on, the company partnered up with OpenAI, a start-up that’s capturing the imaginations of investors worldwide.
But let’s put Microsoft aside for a moment. Many stocks can benefit from the AI trend, but some are less obvious than others. For one such under-the-radar AI pick, investors should consider buying shares of Booking Holdings (NASDAQ: BKNG).
Booking stock is at an all-time high as of this writing, but if management’s AI plan works out, then the stock could continue notching new highs in the future.
How AI can help a travel platform
Before I explain how AI can help, it’s best to start with how the company makes money. Booking is a platform that travelers can use to find flights, hotels, rental cars, and more.
After finding what they need, travelers can choose to book directly with the airline, rental car company, etc. In these cases, Booking simply earns a commission. It’s a good business and has made the company what it is today. However, management has greater aspirations.
Booking’s management would prefer its users book every aspect of their travel on its platform directly — it calls this a “connected trip.” To even make this vision a possibility, the company had to build out its own payments platform.
A travel agent would help people book every aspect of their trip. But employing a human agent would be cost-prohibitive for a company the size of Booking. Therefore, management is hoping it can train its AI to do the work of a travel agent, pushing its vision for connected trips forward.
It’s more than just a vision. If Booking can keep making progress on this, shareholders should reap the benefit.
Why this is the right lever to pull
By processing customers’ payments itself, Booking can hold on to travelers’ cash for just a little longer, which is a boost to the company’s cash flow. As the chart below shows, free-cash-flow growth is outpacing revenue growth over the last five years.
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