In many transactions between a buyer and a seller, there’s a middleman. For a customer, that may mean shopping at a store, with the store making a small profit for stocking goods from dozens of various providers.
While that business model has low profit margins, the margins can improve when it involves a service. A middleman can find an optimal deal, and still make a great return overall.
One such middleman is Booking Holdings (BKNG), the parent company of travel services company Priceline. Rising travel demand may be showing some signs of slowing, but Booking has grown revenues and earnings by nearly 30 percent and 50 percent over the past year.
Plus, the company has a profit margin of 23 percent, meaning it’s a cash-generating machine that’s fueling a massive share buyback program.
Action to take: Long-term investors may like shares here. While shares are near an all-time high, the buyback program is set to retire nearly a quarter of the company’s shares in the years ahead.
Booking doesn’t pay a dividend, but could also go that route if it feels buying back shares would be too expensive right now.
For traders, shares can likely continue their uptrend. While shares are pricey at over $3,000 each, the June 2024 $4,500 calls, last going for about $23.00, could still see mid-to-high double-digit returns in the months ahead.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.