Market Overview

Morgan Stanley Expects Sabre To See 'Minimal Disruption' From 737 Max Grounding

Morgan Stanley Expects Sabre To See 'Minimal Disruption' From 737 Max Grounding

Technology provider to the travel industry, Sabre Corp (NASDAQ: SABR) is likely to see "minimal disruption" to its business from the grounding of Boeing Co (NYSE: BA)'s 737 Air Max, according to Morgan Stanley.

The Analyst

Morgan Stanley's Brian Essex maintains an Equal-weight rating on Sabre with an unchanged $27 price target.

The Thesis

The U.S. Federal Aviation Administrations's move to ground all Boeing 737 MAX 8 and 9 aircraft in the U.S. will likely result in "short-lived pressure" on airlines, Essex said in a research report. Companies like Sabre who sell products and services to hundreds of airliners will likely not feel any impact given the minimal number of aircrafts delivered so far.

American Airlines Group Inc (NASDAQ: AAL) is a known customer of Sabre and received 24 737 MAX aircraft that are now grounded. The company said it operates around 85 MAX flights per day among its 6,700 departures, which implies the Boeing line of jets accounts for around 1.3 percent of all of its flights.

While the airline industry could see lower capacity growth, Essex said carriers have several levers it can pull to mitigate any pressure. There's unlikely to be any shift in sentiment away from flying in the near term. As such, there is likely to be minimal impact on passenger boarded volume, which is a driver of revenue for Sabre's Travel Network business.

Price Action

Sabre shares were trading at $21.31 Monday morning.

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Latest Ratings for SABR

Dec 2020Morgan StanleyUpgradesEqual-WeightOverweight
Dec 2020MizuhoUpgradesUnderperformNeutral
May 2020CFRAMaintainsHold

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