Goldman Removes Sabre From 'Conviction Buy' List, Sees Few Near-Term Catalysts

Goldman Sachs removed Sabre Corp SABR from its Conviction Buy List on lack of near-term catalysts due to tepid near-term macro conditions and travel datapoints.

However, the brokerage reiterated its Buy rating on Sabre given combination of long-term growth potential and attractive valuation.

"We continue to see significant untapped long-term growth potential for Sabre as we believe its steady growth profile in Travel Network (we see normalized growth of 4% - 6% across macro cycles), combined with secular growth in Solutions (we see 15%+ sustained growth)," analyst James Schneider wrote in a note.

Schneider expects a muted third quarter given geopolitical risk and impact on U.S. airline passenger traffic and overhang on the shares until the appointment of a new CEO, which the company expects at the end of 2016.

Further, the analyst believes Sabre can sustain high-single digit range top line growth and 15 percent plus EPS growth across the cycle.
However, Schneider cut his 2016 EPS view to $1.43 from $1.45 on a customer charge in third quarter.

That said, the analyst maintained his 12-month price target at $37, based on 22X CY17 estimated EPS of $1.70. Schneider feels the valuation is compelling as the stock trades below 9X EV/EBITDA.

At time of writing, shares of Sabre fell 1.29 percent to $27.63. The analyst's $37 price target represents a potential upside of 32 percent.