UBS maintains Buy rating and $11 target on GBTG shares

On Friday, UBS analyst Stephen Ju reaffirmed a Buy rating for Global Business Travel Group Inc. (NYSE:GBTG) with a steady price target of $11.00. Currently trading at $8.22, InvestingPro analysis suggests the stock is undervalued, with additional upside potential. InvestingPro Tips indicate net income is expected to grow this year, making this an interesting opportunity for value investors. Ju’s evaluation acknowledges a slowdown in new business due to postponed contract decisions for 2024 to 2025, noting that new wins for the quarter totaled $2.8 billion, with small and medium-sized enterprises (SMEs) contributing approximately $2.2 billion.

Ju highlighted the company’s focus on margin expansion and a higher cash flow trajectory as key factors. Management’s strategy is expected to result in an 11-17% adjusted EBITDA dollar growth and a 27% increase in normalized free cash flow (FCF) by 2025, after adjustments for acquisition and legal fees related to the CWT transaction. InvestingPro data reveals impressive gross profit margins of 60.09% and current EBITDA of $306 million, supporting the company’s margin expansion narrative.

GBTG has announced initiatives to eliminate roughly $95 million in expenses while planning to reinvest about $65 million to enhance customer experience and achieve efficiency gains through the use of artificial intelligence (AI). Ju believes these efforts will allow the company to reduce implementation times and convert new contracts into transaction value more effectively.

In his commentary, Ju stated, "Although new business wins have slowed given what appears to be delayed 2024-to-2025 contract decisions - new wins in the quarter were $2.8B and SMEs accounted for ~$2.2B - the more important consideration is the margin expansion and higher cash flow path that management has put in place to drive double-digit (11-17%) Adj. EBITDA dollar growth alongside 27% normalized FCF growth in 2025 (adjusting for acquisition/legal fees for CWT)."

He further added, "GBTG announced plans to extract ~$95M of expenses with the intent to reinvest ~$65M focused on improving the customer experience and driving efficiency gains by leveraging AI. In our view, this should enable the company to shorten implementation times, which should help translate the aforementioned new wins into transaction value."

Ju’s reiteration of the Buy rating and his confidence in GBTG’s strategic direction maintain the $11 price target for the company’s stock. The broader analyst consensus remains bullish, with price targets ranging from $9 to $11. For deeper insights into GBTG’s valuation and growth prospects, including 6 additional exclusive ProTips and comprehensive financial analysis, check out the full company research report on InvestingPro.

In other recent news, Global Business Travel Group Inc., also known as American Express (NYSE:AXP) Global Business Travel (Amex GBT), reported strong financial results for the fourth quarter of 2024, with revenue increasing by 8% year-over-year to $591 million. The company also achieved a 39% rise in adjusted EBITDA, reaching $110 million for the quarter. For the full year 2024, Amex GBT’s revenue totaled $2.42 billion, marking a 6% increase from the previous year. Despite these robust financial metrics, the company’s proposed acquisition of CWT Group LLC is facing legal challenges, with the U.S. Department of Justice filing a lawsuit to block the merger. S&P Global Ratings recently upgraded Amex GBT’s credit rating from ’B+’ to ’BB-’ due to its strong performance and stable outlook. The ratings agency noted that Amex GBT’s leverage ratio is expected to decrease further, enhancing its financial position. The company has also been proactive in managing its capital, with plans for $300 million in share repurchases authorized through 2027. Looking ahead, Amex GBT projects revenue growth of 5%-7% for 2025 and aims to continue expanding its market share in the business travel sector.

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