Two 59%+ winners, four above 25% in Aug – How this AI model keeps picking winners
On Friday, UBS initiated coverage on Global Business Travel Group Inc. (NYSE:GBTG) stock with a Buy rating and a price target of $11.00. The firm is optimistic about the company's position as a category leader in the business travel sector. According to UBS, Global Business Travel Group is 39% larger than its nearest competitor and handles approximately 13% of managed business travel spend.
The analyst from UBS outlined a variety of revenue compound annual growth rate (CAGR) scenarios for Global Business Travel Group from 2023 to 2027, ranging from 2.5% to 10.7% year-over-year, with a base estimate of 6.4%. These projections are contingent on the company's performance in securing new wins with small and medium-sized enterprises (SMEs) and in premium transactions.
UBS further noted that Global Business Travel Group is on track to meet its long-term adjusted EBITDA margin target of 25% by 2027. This target is expected to be achieved through stringent cost discipline and increased automation. The firm also highlighted the stock's attractiveness due to potential buybacks beyond the currently authorized $300 million and the ongoing trend of SMEs shifting towards managed travel.
The company's strategic acquisitions of Egencia and Ovation in 2021 are seen as moves that will enable Global Business Travel Group to increase its share as SMEs transition to managed travel services. UBS suggested that there could be upward revisions to estimates if SMEs convert to managed travel faster than the 25 basis points of share gain between 2023 and 2027 currently predicted by GBTA and Euromonitor data.
Lastly, UBS's valuation analysis indicates that at the current share price of $8.98, the market is factoring in a 16% adjusted EBITDA growth, which is below UBS's estimate of 18%. The firm believes that a higher adjusted EBITDA multiple of 9 times is justified, compared to the Street's 8 times, reflecting their confidence in the company's growth prospects.
In other recent news, Global Business Travel Group and American Express (NYSE:AXP) Global Business Travel (Amex GBT) have reported strong financial performance. Global Business Travel Group saw a 5% revenue increase and a significant beat on adjusted EBITDA, driven by a surge in demand for its software and services, and a 9% year-over-year growth in total transaction value. In response to these results, Citi has raised the company's price target to $10.00, maintaining a Buy rating.
Similarly, Amex GBT reported a 5% rise in revenue, reaching $597 million, and a substantial 23% increase in adjusted EBITDA to $118 million. The company also announced the successful execution of its first share buyback. Amex GBT expects a 5% increase in travel spending in Q4 among its top 100 customers and anticipates the closure of the CWT acquisition in early 2025.
These are recent developments that highlight both companies' robust market share growth and operational efficiency. Both companies have tightened their full-year revenue and adjusted EBITDA outlooks, reflecting their positive financial performance. However, it's important to note that these projections are based on the current market conditions and could change in the future.
InvestingPro Insights
Global Business Travel Group Inc. (NYSE:GBTG) has been showing strong market performance, aligning with UBS's optimistic outlook. According to InvestingPro data, the company's stock has seen impressive returns, with a 19.16% increase over the past month and a substantial 52.61% gain over the last six months. This upward trajectory has brought the stock price to 98.86% of its 52-week high, trading at $9.08 as of the last close.
InvestingPro Tips highlight that GBTG operates with a moderate level of debt and has liquid assets exceeding short-term obligations, which supports UBS's view on the company's financial stability. Additionally, the company boasts impressive gross profit margins, with InvestingPro data showing a gross profit margin of 59.51% for the last twelve months as of Q3 2024. This strong margin aligns with UBS's projection that GBTG is on track to meet its long-term adjusted EBITDA margin target.
While the company was not profitable over the last twelve months, an InvestingPro Tip suggests that net income is expected to grow this year, and analysts predict the company will be profitable this year. This outlook corresponds with UBS's positive revenue growth scenarios and potential for upward estimate revisions.
For investors seeking more comprehensive insights, InvestingPro offers 11 additional tips for GBTG, providing a deeper analysis of the company's financial health and market position.
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