Sabre Corporation (SABR) is a travel-based software and technology company operating in two segments – Travel Solutions; and Hospitality Solutions. Operating in more than 180 countries, SABR acts as a business-to-business travel marketplace and operates reservation systems. However, the company has an ISS Governance quality score of 6, indicating relatively high governance risk.

Shares of SABR have been declining since early 2020, given the imposition of blanket travel restrictions during the initial days of the pandemic. The stock fell 66.5% over the past two years. Despite the gradual uplifting of the travel ban and rising demand for leisure travel earlier this year, SABR failed to regain momentum. The stock declined 32% year-to-date and 41% over the past six months.

Here’s what could shape SABR’s performance in the near term:

The Reimposition of Travel Ban

COVID-19 cases in the United States are rising again, driven by the spread of the highly contagious omicron variant, the holiday season, and harsher weather conditions. The national seven-day average indicates that COVID-19 cases in the country have risen 22% over the past two weeks and are currently averaging 120,000 cases per day. Hospitalizations have increased 20% since the end of November.

The White House has already imposed travel restrictions from the red zone countries and increased the testing and quarantine requirements for international and domestic travel. SABR’s operations are expected to be severely impacted due to the resurgence of COVID-19 cases, as people become reluctant to travel during this period.

Poor Financials

For the fiscal third quarter ended September 30, 2021, SABR’s revenues increased 58% year-over-year to $441.09 million. However, the operating loss came in at $156.69 million. This can be attributed to increased incentive expenses and technology hosting expenses due to volume recovery trends and increased professional service expenses. Adjusted net loss and adjusted EPS amounted to $161.67 million and $0.50, respectively. Adjusted EBITDA loss stood at $54.93 million.

Solvency Concerns

SABR’s trailing-12-month debt stands at $4.87 billion. However, the company doesn’t have sufficient cash flows to meet its interest expenses and principal repayment expenses. Its trailing-12-month operating cash flow and levered free cash flow are negative $592.90 million and $261.76 million, respectively. As a result, SABR’s debt/free cash flow ratio stands at negative 18.06. Moreover, the company’s book value per share is negative $10.68, indicating that its total liabilities are significantly higher than its total assets. Also, the company’s long-term debt to total capital is 106.57%.

POWR Ratings Reflect Bleak Prospects

SABR has an overall rating of D, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

SABR has a grade of D for Sentiment and Stability. Analysts expect the company’s EPS to remain negative until at least 2022, in sync with the Sentiment grade. In addition, SABR’s relatively high beta of 2.07 justifies the Stability grade.

Of the 77 stocks in the F-rated Internet industry, SABR is ranked 50.

In total, we rate SABR on eight different levels. Beyond what we’ve stated above, we have rated SABR for Growth, Quality, Momentum, and Value. Get all SABR ratings here.

Bottom Line

Omicron has caused the travel and tourism industry to take a hit yet again. With rising COVID-19 cases and the reimposition of the travel ban, the demand for leisure travel will likely reduce in the upcoming months. With bleak growth prospects, SABR is best avoided now.

How Does Sabre Corporation (SABR) Stack Up Against its Peers?

While SABR has a D rating in our proprietary rating system, you might want to consider looking at its industry peers, Travelzoo (TZOO), Yelp Inc. (YELP), and AcuityAds Holdings Inc. (ACUIF), which have an A (Strong Buy) rating.

SABR shares were trading at $7.41 per share on Wednesday afternoon, down $0.77 (-9.41%). Year-to-date, SABR has declined -38.35%, versus a 25.63% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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