Nov. 18, 2021
Here is the article.
Sabre: Top Travel Pick For 2021-2022
Summary
- Sabre is one of the largest global distribution systems (GDS) for worldwide travel. It's presented here as an alternative investment to individual airlines, hotels, cruise lines or ETFs.
- The company invested heavily in its technology during the travel recession by upgrading to the Cloud, is working closely with Google AI, and is now gaining market share over rivals.
- The company's economic model is relatively easy to follow: transaction-based revenues which correlate with the TSA travel numbers (links provided below).
- There has been a high (bullish) ratio of call-buying over puts in the January to April 2021 time frame.
- As worldwide travel resumes, the stock could double in 2021-22.
Sabre (SABR) has been a great recent discovery for me. Amidst all the bearishness in the travel industry this year, Sabre wisely plowed its resources into technology upgrades for 2019-20 by transitioning its platform to the cloud, and now this cost-cutting and upgrading will go straight to its-bottom line as volume transactions rise in 2021-22.
Sabre is one of the travel industry's largest global distributions systems (GDS), alongside Amadeus (OTCPK:AMADY) and Travelport (private). Together, these three companies comprise 97% of all travel bookings worldwide. An investment in Sabre places an investor squarely at the center of global travel sales.
Sabre's system:
- Processes more than 42,000 transactions a second.
- 57,000 travel agencies around the world log into a Sabre desktop each day.
- Is available 24/7, seven days a week.
Which travel websites use Sabre?
- Expedia (NASDAQ:EXPE): Orbitz, Travelocity, Hotels.com, Tripadvisor.com, SeatGuru.com, Cheaptickets.com
- Booking (NASDAQ:BKNG): Kayak, Agoda, Priceline, CheapFlights, Momondo, OpenTable, RentalCars
- Google (NASDAQ:GOOG) (NASDAQ:GOOGL) Flights and Hotels
- Hilton Worldwide (NYSE:HLT)
- Marriot (NASDAQ:MAR)
- Hyatt Hotels (NYSE:H)
- Caesars Entertainment (NASDAQ:CZR)
Sabre's revenue is based on the volume (number) of transactions it processes, not the dollar value of those transactions. Thus when transactions escalate in an economic recovery, Sabre's revenues increase commensurately.
Given that 2020 will go down in history as the worst travel year of the modern era, it is not a stretch to envision a return to normalcy in 2021-22, and with it, positive growth for Sabre. This process of recovery has already begun. (See: Sabre shares gain after busiest air travel weekend since March by Brandy Betz, Dec. 28, 2020).
Sabre currently trades at half its 2019 value, and I think there is more to come.
The company recently received upgrades from both Morgan Stanley and Mizuho (See: Sabre shares gain 4.7% after Morgan Stanley's bullish upgrade and doubled price target by Brandy Betz, Dec. 17, 2020). Because Sabre's revenues follow transaction data, its data foreshadows a what's-to-come-in-travel, a bellwether, so to speak, of the travel and hospitality industry.
Sabre's global distribution system (GDS) is an immensely complex web of technologies that facilitates transactions between service providers in the travel industry. Travel agencies are their foremost customers. They use the GDS to gain real-time access to inventories in order to book hotel rooms, airline tickets, car rentals, cruises, trains and other travel products for their customers.
A recent addition to this software has been the New Distribution Capability, or NDC. It is an XML standard created by the International Air Transportation Association (IATA). It allows airline service-providers to deliver rich content and ancillary services to their customers.
NDC provides the ability to customize individual tickets with choices (flight class, seat, meals, perks, etc.) and can increase value-added revenues for every single airline ticket. This capability has led to billions in increased revenues for airlines.
The chief takeaway for investors here is that high barriers exist to new entry in this field of technology, and only three companies direct most of the sales traffic. Competition for the travel-dollar is intense.
No comments:
Post a Comment