Imperial Capital Projects Sabre Corp. Shares Will Fly 47% Higher

Travel tech provider Sabre Corp SABR is at a inflection point thanks to a long-term plan for earnings and free cash flow growth, according to Imperial Capital.

The Analyst

Analyst Adam Hackel initiated coverage of Sabre Corp. with an Outperform rating and $30 price target.

The Thesis

After a difficult fiscal 2017, when the shares of Sabre hit a low of $17 compared to a $30 peak in fiscal 2016, the company laid out a plan at its March 6 investor day, Hackel said in a Thursday note. (See the analyst's track record here.) 

The weakness in 2017 stemmed from subpar revenues and EBITDA at Sabre's Airline Solutions business, as well as higher costs due to an inefficient management structure, the analyst said.

Sabre's plan envisages simplified product offerings across its segments — namely Travel Network, Airline Solutions and Hospitality Solutions — and a "unilateral focus" on retailing, distribution and fulfillment, according to Imperial Capital. 

Revenues tied to these services accounted for more than 95 percent of Sabre's total 2017 revenue, Hackel said.  

Imperial based its bullish stance on the following five factors, the analyst said:  

• Favorable growth in the Airline Solutions business, which has high barriers to entry.
• Expansion into the fast-growing Hospitality Solutions industry.
• Modest growth in Global Distribution Services as the company expands market share with key travel agents.
• Strong free cash flow generation, with the possibility of restarting dividend growth in fiscal 2019. 
• Attractive valuation.

The Price Action

Sabre shares have been nearly flat year-to-date. The stock was up 1.57 percent at the time of publication Thursday morning. 

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