PROS Holdings Set To Benefit From Earlier Recovery In Air Travel, Predicts Analyst

Needham analyst Scott Berg reiterates PROS Holdings Inc PRO with a Buy rating and a $35 price target.

The re-rating follows reviewing recent IATA air traffic passenger data that suggest air travel demand is running ahead of current projections and the time is right for PRO travel customers to restart pricing-related software investments. 

IATA predicts total passenger traffic will return to pre-pandemic levels in 2024, a year earlier than prior expectations, driven by Chinese passenger traffic almost entirely recovering once the country reopened its international borders. 

APAC remains behind in traffic recovery at only 60% of 2019 levels versus all other areas at 84% or better, but improvement in China caused APAC traffic to jump 11% Q/Q. 

Lastly, domestic travel globally continues to trump international travel, but that delta has decreased sharply over the last 18 months.

Even with a weakened macro affecting demand in specific sectors and inflation impacting purchasing power, air travel's recovery continued through 1Q steadily. 

The analyst highlighted updated flight data from the International Air Travel Association (IATA) that shows a generally consistent recovery since 2021, even though overall passenger traffic still trails pre-pandemic levels. 

With recent strength, IATA is now projecting a worldwide recovery to pre-pandemic travel levels by 2024, which the analyst believes to be a welcome development for PROS. 

He believes more robust international travel is the key driver to returning PROS' travel customer base to a state where they can return to investing in PROS' solution at 2019 levels or better.

Revenue passenger-kilometers flown (RPK - the industry benchmark) is improving, with Industry-wide RPKs coming in just 12.0% below 2019 levels for March. 

According to IATA, 1Q23 RPKs Industry-wide increased to 85.9% of 1Q19 levels, a material step-up from 54.3% in CY22. 

However, March FY23 International RPKs as a percentage of March FY19 levels still lagged Domestic by 17.3 points and Industry-wide RPKs by 6.4 points.

Price Action: PRO shares traded higher by 0.27% at $29.52 on the last check Thursday.