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Sabre Corp SABR

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Morningstar’s Analysis

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Sabre Sees Oct./Nov. Demand and Liquidity Improvement in Uncertain Landscape; Shares Cheap

Dan Wasiolek Senior Equity Analyst

Analyst Note

| Dan Wasiolek |

Sabre shares moved 5% higher, as it saw an improvement in higher-margin corporate travel in both October and November. In this vein, Sabre’s November air bookings reached 49% of 2019 levels, above our 45% estimate for the entire fourth quarter and above the 38% seen in its third quarter. Given this is approaching the 55%-65% level at which Sabre expects to see breakeven free cash flow, the company has terminated the $300 equity shelf announced in mid-August. We find this news encouraging, as we thought raising liquidity around the current equity price was both value destructive and unwarranted, given Sabre ended its third quarter with $1 billion in cash, no near-term debt maturing, and demand trending near break-even free cash flow at that time. We don’t plan to alter our $15 fair value estimate at this time, which accounts for COVID-19, corporate demand, and competitive pressures. Although we expect shares to remain volatile given these concerns, we see an opportunity for long-term investors.

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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 sales and profits.

3150 Sabre Drive
Southlake, TX, 76092
T +1 682 605-1000
Sector Technology
Industry Information Technology Services
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Distressed
Employees 7,531