Sabre (SABR – Research Report), the Consumer Cyclical sector company, was revisited by a Wall Street analyst yesterday. Analyst Victor Cheng from Bank of America Securities reiterated a Hold rating on the stock and has a $4.50 price target.
Victor Cheng’s rating is based on the assessment that while some risks have been mitigated, there are still significant challenges ahead for Sabre. The renewal of the SabreSonic contract with American Airlines and the settlement of legal costs are positive developments, but concerns remain about Sabre’s ability to achieve its financial targets for 2025, particularly in terms of EBITDA and free cash flow. The need for reinvestment and the prospect of prolonged higher interest rates are expected to pressure margins and cash flows, leading to a Hold rating.
In addition, the distribution outlook highlights slower growth, with recent losses in air distribution expected to impact bookings. Although there might be potential gains if certain airlines switch systems, the overall growth in the air industry is projected to be slower than pre-COVID levels, limiting upside potential. Revenue per booking growth is also expected to slow, adding to the cautious outlook. These factors combined lead to a balanced risk-reward assessment in the near term, justifying the Hold recommendation.