Goldman Turns Bearish on Airline Vendor Sabre

Sabre Corp SABR is exposed to slowing growth in airline travel and may see sluggishness in corporate travel that could affect its lodging business, Goldman Sachs said in a Wednesday downgrade note. 

The Analyst

James Schneider downgraded Sabre from Neutral to Sell and lowered the price target from $23 to $20.

The Thesis

Goldman sees trouble in all of Sabre’s business segments, Schneider said in the downgrade note. (See his track record here).

The major airlines have seen a slowdown in passenger growth in recent quarters after years of strong upward momentum, the analyst said. 

In Sabre’s airline solutions business, Schneider said momentum has slowed “significantly” in recent quarters — and the company has failed to announce many new clients in the last couple years.

“Given prospects for slowing industry passenger growth, limited room for pricing improvements, and headwinds from recent client de-conversions, we expect revenue growth to remain sluggish in Airline Solutions for the foreseeable future." 

Sabre sells airlines reservations and other systems. 

Hotel Demand May Slow Too

Things aren’t a lot better in hotels, which are served by the company’s hospitality solutions unit, Schneider said. 

Most hotel companies have turned cautious on their demand outlook and expect a slowdown in 2019, he said, with worries about corporate travel, where Sabre is particularly exposed.

“We believe management is taking the right steps to execute on the company’s transformation and position it for sustainable long-term growth,” the analyst said.

“However, we believe it may be some time before many of these investments can convert to new client wins that drive revenue, and in the meantime we expect cyclical and industry-level challenges will dampen growth over the next 12-18 months.”

Price Action

Sabre shares were up 1.08% at $23.04 at the time of publication Wednesday. 

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