Sabre (SABR)

Travel technology company Sabre (NASDAQ:SABR) fell short of the market’s revenue expectations in Q1 CY2025, with sales flat year on year at $776.6 million. Next quarter’s revenue guidance of $786.4 million underwhelmed, coming in 1.8% below analysts’ estimates. Its non-GAAP loss of $0 per share was in line with 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.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Sabre struggled to consistently generate demand over the last five years as its sales dropped at a 3.3% annual rate. This was below our standards and suggests it’s a lower quality business.

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 annualized revenue growth of 5.9% over the last two years is above its five-year trend, but we were still disappointed by the results.

We can dig further into the company’s revenue dynamics by analyzing its number of total bookings and central reservation system transactions, which clocked in at 96.36 million and 30.77 million in the latest quarter. Over the last two years, Sabre’s total bookings averaged 4.3% year-on-year growth while its central reservation system transactions averaged 5.6% year-on-year growth.

This quarter, Sabre missed Wall Street’s estimates and reported a rather uninspiring 0.8% year-on-year revenue decline, generating $776.6 million of revenue. Company management is currently guiding for a 2.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 7.5% over the next 12 months. Although this projection implies its newer products and services will catalyze better top-line performance, it is still below the sector average.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Sabre’s operating margin has risen over the last 12 months and averaged 7.3% over the last two years. The company’s higher efficiency is a breath of fresh air, but its suboptimal cost structure means it still sports paltry profitability for a consumer discretionary business.

In Q1, Sabre generated an operating profit margin of 13.3%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

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.

Sadly for Sabre, its EPS declined by 19.6% annually over the last five years, more than its revenue. However, its operating margin actually expanded during this time, telling us that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.

In Q1, Sabre reported EPS at $0, up from negative $0.02 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast Sabre’s full-year EPS of negative $0.17 will reach break even.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Sabre broke even from a free cash flow perspective over the last two years, giving the company limited opportunities to return capital to shareholders.

Sabre burned through $98.49 million of cash in Q1, equivalent to a negative 12.7% margin. The company’s cash burn was similar to its $95.77 million of lost cash in the same quarter last year.

Over the next year, analysts predict Sabre’s cash conversion will improve. Their consensus estimates imply its breakeven free cash flow margin for the last 12 months will increase to 7.5%, giving it more optionality.

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 5.7%, 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.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Sabre burned through $16.28 million of cash over the last year, and its $5.12 billion of debt exceeds the $651.1 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Sabre’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Sabre until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

We struggled to find many positives in these results. Its full-year EBITDA guidance missed significantly and its EPS fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 2% to $2.41 immediately after reporting.

Updated: July 9, 2025 at 10:52 PM EDT

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 isn’t a terrible business, but it isn’t one of our picks. Although its revenue growth was exceptional over the last five years, it’s expected to deteriorate over the next 12 months and its declining EPS over the last five years makes it a less attractive asset to the public markets. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is 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 17.3x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $4.58 on the company (compared to the current share price of $3.20).

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.