Sabre (SABR)

Travel technology company Sabre (NASDAQ:SABR) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 3.5% year on year to $715.2 million. On the other hand, next quarter’s revenue guidance of $644.9 million was less impressive, coming in 3.5% below analysts’ estimates. Its GAAP profit of $1.98 per share was significantly above analysts’ consensus estimates.

Company Overview

Originally a division of American Airlines, Sabre (NASDAQ:SABR) is a technology provider for the global travel and tourism industry.

Airlines, hotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional airlines, hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.

Sabre’s primary competitors include Amadeus IT (AMS:AMS), Expedia (NASDAQ:EXPE), Booking Holdings (NASDAQ:BKNG), Trip.com (NASDAQ:TCOM), and private company Travelport.

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Sabre grew its sales at a sluggish 7.6% compounded annual growth rate. This fell short of our benchmark for the consumer discretionary sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new property or trend. Sabre’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

We can better understand the company’s revenue dynamics by analyzing its number of total bookings, which reached 95.14 million in the latest quarter. Over the last two years, Sabre’s total bookings averaged 1.5% year-on-year growth. Because this number is higher than its revenue growth during the same period, we can see the company’s monetization has fallen.

This quarter, Sabre reported modest year-on-year revenue growth of 3.5% but beat Wall Street’s estimates by 1.2%. Company management is currently guiding for flat sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 1.3% over the next 12 months. While this projection suggests its newer products and services will spur better top-line performance, it is still below average for the sector.

Sabre’s operating margin has risen over the last 12 months and averaged 10.6% over the last two years. Its profitability was higher than the broader consumer discretionary sector, showing it did a decent job managing its expenses.

In Q3, Sabre generated an operating margin profit margin of 13.1%, up 2.9 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sabre’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q3, Sabre reported EPS of $1.98, up from negative $0.16 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Sabre’s full-year EPS of $1.23 to shrink by 88.3%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

While Sabre posted positive free cash flow this quarter, the broader story hasn’t been so clean. Over the last two years, Sabre’s demanding reinvestments to stay relevant have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 4.7%, meaning it lit $4.68 of cash on fire for every $100 in revenue.

Sabre’s free cash flow clocked in at $13.42 million in Q3, equivalent to a 1.9% margin. This cash profitability was in line with the comparable period last year and above its two-year average.

Looking forward, analysts predict Sabre will generate cash on a full-year basis. Their consensus estimates imply its free cash flow margin of negative 9.2% for the last 12 months will increase to positive 4%, giving it more money to invest.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Sabre’s five-year average ROIC was negative 1.8%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer discretionary sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Sabre’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.

Debt is a tool that can boost company returns but presents risks if used irresponsibly. As long-term investors, we aim to avoid companies taking excessive advantage of this instrument because it could lead to insolvency.

Sabre’s $4.22 billion of debt exceeds the $682.7 million of cash on its balance sheet. Furthermore, its 7× net-debt-to-EBITDA ratio (based on its EBITDA of $497.6 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Sabre could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Sabre can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

It was good to see Sabre beat analysts’ EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its EBITDA guidance for next quarter missed and its number of total bookings fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 10.9% to $1.79 immediately after reporting.

Updated: December 4, 2025 at 10:02 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Sabre.

Sabre doesn’t pass our quality test. To kick things off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its number of central reservation system transactions has disappointed. On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Sabre’s P/E ratio based on the next 12 months is 10.5x. While this valuation is fair, the upside isn’t great compared to the potential downside. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $2.63 on the company (compared to the current share price of $1.68).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.