4. Sabre Corporation (NASDAQ:SABR)
Share Price as of July 12: $3.12
Number of Hedge Fund Holders: 23
Sabre Corporation (NASDAQ:SABR) is a software and tech company that runs through the Travel Solutions and Hospitality Solutions segments. The company offers a range of software technology products and solutions through software-as-a-service (SaaS) and hosted delivery models in the travel industry. The company’s travel distribution platform caters to travel suppliers, including airlines, hotels, and others, as well as clients like agencies and corporations.
It is one of the largest global distribution systems (GDS) providers for air bookings. Through its global distribution system, Sabre (NASDAQ:SABR) connects travel suppliers such as airlines and hotels with travel sellers like agencies that offer real-time availability and pricing which are crucial for corporate travel management.
Sabre (NASDAQ:SABR) is thriving in the distribution industry, as it showed strong growth in Q1 2024 with its market share expanding consistently for the fifth consecutive quarter. The company is tackling the complexities of today’s travel market with advanced distribution solutions.
The company’s multi-source platform is a standout, and now features content from 20 new low-cost airlines. The platform integrates new distribution capabilities with the company’s own APIs and business logic, which allows airlines to effectively manage their inventory and pricing strategies across different sales channels. The integration aims to provide customers with better choices, transparency, and efficiency when booking flights.
Sabre’s (NASDAQ:SABR) position is strong because of its strategic partnerships and enhanced capabilities. Recently, the company’s strengthened ties with Air India increased booking volumes and market reach. Essential renewals with Southwest Airlines and Alaska Airlines further solidify Sabre’s (NASDAQ:SABR) growth, as both airlines surpass industry distribution booking rates.
Management is optimistic about future prospects based on multiple factors, including a robust pipeline of upcoming business opportunities. anticipated collaborations with global airlines such as Air India, and its multi-source platform’s distribution capabilities.
Despite its current lack of profitability, the company’s strategic dominance as a GDS provider for air bookings, consistent growth, strategic partnerships with major airlines, and ongoing innovations position it favorably to capitalize on the increasing demand for travel technology solutions. The company’s strategic initiatives, including cost efficiency and restructuring efforts, are also expected to be significantly beneficial for the company.
For example, the cost reduction plan initiated in 2023 is aimed at structurally reducing Sabre’s cost base, which is anticipated to positively impact financials in 2024 and 2025. A key component of this transformation is the ongoing migration to Google Cloud, which has substantially lowered the costs involved in running their computing operations. Additionally, Sabre has successfully reduced its adjusted SG&A (Selling, General & Administrative) expenses and technology expenses by 16% year-over-year in the first quarter of 2024. The introduction of generative AI tools to approximately 800 of their software engineers has further accelerated product development and innovation, contributing to lower development costs. Moreover, the implementation of new productivity-enhancing tools and processes, including AI and automation, has improved overall efficiency. By achieving its operational cost savings targets, Sabre expects to realize an overall technology cost reduction exceeding $150 million by 2025 compared to 2023.
Additionally, Sabre’s track record in successful business segment sales, such as the sale of AirCentre for $392 million in 2022, suggests potential future divestitures that could further enhance financial flexibility and reduce debt. According to the consensus opinion of 10 analysts, the stock is a Buy and the average price target of $4.00 has an upside of 28.2% to present levels, as of July 12.
Moreover, Sabre’s (NASDAQ:SABR) guidance for 2024 and 2025 projects significant growth, with expectations of $3 billion in revenue and $500 million in Adjusted EBITDA for 2024, and adjusted EBITDA of over $700 million and free cash flow close to $200 million for 2025. If the company realizes these projections, the company’s valuation could improve significantly and add to investor confidence.
At a stake value of $126.147 million, 23 hedge funds held positions in Sabre Corporation (NASDAQ:SABR) in the first quarter. As of March 31, Fundsmith LLP is the most dominant shareholder in the company and has a position worth $52.456 million.
