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Sabre Corp SABR

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We See Sabre's Demand Outlook Largely Unchanged, but Shares Appear Undervalued Again

Dan Wasiolek Senior Equity Analyst

Analyst Note

| Dan Wasiolek |

With the shares down more than 10% after Sabre's first-quarter results, we think any disappointment regarding the pace of the company’s demand rebound is too extreme. In fact, we still think Sabre’s air bookings could reach half of 2019 levels this year, given that the metric has trended up to 24% of 2019 levels in the first quarter from 20% last quarter, with April improving to 34% of prepandemic marks, and assuming the rest of the year averages around 60% of 2019. Demand in North American offers hope of reaching this target, with regional air volume improving to 32% of 2019 levels in the first quarter, up from 25% last quarter, with April showing a further lift to 46% of prepandemic marks as vaccination uptake in the region increases. We expect U.S. demand to continue to improve this year, with Europe a few months behind. That said, the relative near-term strength seen in the lower-yielding U.S. market could temper our 2021 revenue estimate while having little bearing on our out-year forecast. Overall, we don’t expect a meaningful change to our $17.30 fair value estimate. We see an attractive margin of safety for investors interested in a later-cycle travel recovery play tied to air and corporate travel, despite anticipated near-term volatility.

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Company Profile

Business Description

Sabre holds the number-two share of global distribution system air bookings (40.9% as of the end of 2020 versus 38.8% in 2019). The travel solutions segment represented 88% of total 2020 revenue, which was split evenly between distribution and airline IT solutions revenue. The company also has a growing hotel IT solutions division (12% of revenue). Transaction fees, which are tied to volume and not price, account for the bulk of revenue and profits.

3150 Sabre Drive
Southlake, TX, 76092
T +1 682 605-1000
Sector Technology
Industry Information Technology Services
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type Distressed
Employees 7,531


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