Booking Holdings Must Choose Growth Or Value Path, Says CNBC's Cramer

Online travel agency and Priceline parent Booking Holdings Inc BKNG faces an "identity crisis," as its management doesn't know if it is a growth or value company, according to CNBC's Jim Cramer.

What Happened

Companies that sacrifice sales with the purpose of boosting profit are generally considered a value stock, Cramer said during his daily "Mad Money" show Monday. This appears to be a direct excerpt from Booking's playbook when it decided to restructure its marketing spend by lowering its online presence and not increasing TV advertising fast enough to make up the difference, he said. 

At the same time, Booking is looking to position itself as a growth stock, Cramer said. Growth stocks command a superior multiple, but this isn't the case with Booking, the CNBC host said: Booking's stock is trading at 19 times next year's earnings, a discount to rival Expedia Group Inc EXPE, which trades at 21 times next year's earnings.

Why It's Important

While Booking has an identity problem, it also has a performance problem, as seen in its recent earnings report and resulting 7-percent sell-off in the stock, Cramer said. The company needed a strong quarter regardless of what kind of company it considers itself to be, but instead management offered a "tepid forecast" ahead of the all important end-of-summer period, when travel is typically higher.

What's Next

"At the moment Booking is neither fish nor fowl — it doesn't know if it's a growth stock or a value stock," Cramer concluded.

"As long as that's the case, I think you should avoid it. Stick with Expedia, which is doing [it] straight with a growth story that is very easy for investors to understand."

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