#Morningstar #EBITA #SABR #Lessons
Shares tanked around 25%, as the industry’s air recovery appears set to lag prior expectations, and we have lowered narrow-moat Sabre’s fair value estimate to $5 from $8.60, leaving shares undervalued. We expect shares to remain volatile with heightened corporate travel demand uncertainty.
Sabre’s 2023 $2.9 billion in sales (up 15%) and $337 million in EBITDA (12% margin versus 3% in 2022) were around our $2.9 billion and $346 million respective estimates. However, although the company’s share of industry air bookings grew 120 basis points in 2023, its fourth-quarter air booking volumes as a percent of 2019’s levels were just 58% versus a range of 61%-62% in the prior three quarters. This is well below the 1 to 2 percentage-point quarter-to-quarter improvement that we and management had previously incorporated in our 2024-25 outlooks. The industry’s subpar performance is attributable to a slower return of airlift capacity and demand for long-haul corporate travel (where Sabre has large exposure) relative to leisure and short-haul trips as well as some business going to connections directly between agencies and carriers.
As a result, Sabre provided 2024 sales and EBITDA guidance of $3 billion and at least $500 million, respectively, along with a 2025 EBITDA target of more than $700 million, all of which now incorporate flat to nominal improvement in air booking volume from 2023 levels. These targets could prove conservative, given recent surveys and commentary from global airlines pointing to a pickup in long-haul corporate travel this year. But we aren’t blind to the fact that corporate travel’s recovery remains highly uncertain (we have maintained our Very High Uncertainty Rating). Thus, we have reduced our 2024 sales and EBITDA estimates to $3.06 billion and $514 million, respectively, from $3.24 billion and $610 million. Also, we now forecast 2025 EBITDA of $700 million versus our prior $810 million estimate.
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