- B of A Securities analyst Victor Cheng downgraded Sabre Corp SABR from Buy to Underperform and lowered the price target from $11 to $7.
- The analyst became less bullish on the 2023 recovery, leading to more downside potential on the stock, given its high leverage and rising interest rates.
- While Cheng expects the wider airline IT market to grow double digits in FY23 as volumes continue to recover, he estimates SABR’s airline IT solutions to increase by 3% in FY23 amid multiple headwinds, including the migration of Russian carriers, notably Aeroflot and Rossiya, and sale of AirCentre.
- The analyst found it challenging for Sabre to remain competitive given its liquidity concern, deeper cost cuts, and ongoing IT transformation.
- The price target reflects lower growth near-term and a higher WACC of 10.4% (from 9.5%). The Q4 recovery is relatively muted overall.
- In the U.S., recovery has somewhat stagnated, with Winter Storm Elliott leading to canceled flights in the last ten days of December.
- EMEA bookings were sluggish due to lower intra-Europe bookings.
- APAC recovery gained momentum, with many regions improving but partially offset by operational cutbacks in Australia.
- The BofA economists now expect a very likely recession in the U.S. and Europe. Nonetheless, the reopening of Asia and a still-nascent corporate travel recovery are likely to offset the impact of a downturn partially.
- In 2023, Cheng expects Etihad Airways, Hawaiian Airlines, and ITA Airways to migrate away from Sabre.
- However, the planned merger of Spirit Airlines, Inc SAVE (Amadeus customer) with JetBlue Airways Corp JBLU (Sabre customer) can more than offset these losses if Spirit migrates to Sabre.
- Price Action: SABR shares traded lower by 7.93% at $6.39 on the last check Wednesday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
|---|
Benzinga simplifies the market for smarter investing
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
Join Now: Free!
Already a member?Sign in
