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.