On Thursday, Citi maintained a Buy rating on Global Business Travel Group Inc. (NYSE:GBTG) and raised the price target to $9.50 from $9.00. The adjustment is a result of revised modeling assumptions, including an updated outlook on the company's revenue yield versus total transaction value (TTV) growth and a more cautious perspective on the second half of 2024's adjusted EBITDA, now anticipated to fall below the midpoint of $450-$500 million.
The firm's analysts have increased TTV estimates, considering an expected acceleration in the onboarding of new logos. This is despite reducing revenue yield estimates due to a growing proportion of fully digital bookings. Citi's forecast for the fiscal year 2025's stand-alone adjusted EBITDA remains unchanged at $560 million.
The increase in the price target primarily reflects the financial benefits of the company's recent refinancing, which is expected to save around $40 million in annual interest expenses. Moreover, the analyst points to an improvement in market sentiment towards the stock, which has been significantly influenced by the upcoming merger with CWT, expected to close in the first quarter of 2025. The merger announcement has coincided with a notable increase in free float and a three to fourfold rise in daily trading activity for the stock.
In other recent news, American Express (NYSE:AXP) Global Business Travel (Amex GBT) has reported a robust Q2 growth, with revenues increasing by 6% to $625 million and adjusted EBITDA climbing by 20% to $127 million. The company's margin expanded by 240 basis points, largely due to strategic initiatives such as automation and artificial intelligence. These initiatives are expected to deliver $100 million in savings this year. In addition, Amex GBT anticipates the completion of the CWT acquisition by the first quarter of 2025.
Amex GBT also completed a significant share repurchase, buying back 8 million shares of its Class A common stock at approximately $6.85 per share, totaling around $55 million. This move reflects the company's robust financial health and confidence in its long-term business strategy.
Despite a 4% decline in transactions in France, the company saw a 5% increase in transaction volume excluding France. Furthermore, the multinational customer segment demonstrated strong growth, with transactions increasing by 7% and a high customer retention rate of 98% over the past year. Looking ahead, Amex GBT expects higher yields in Q4 and a decrease in expenses in Q3 and Q4, maintaining confidence in its full-year 2024 guidance.
InvestingPro Insights
Global Business Travel Group Inc. (NYSE:GBTG) presents a mixed financial picture that aligns with Citi's recent analysis. According to InvestingPro data, GBTG's revenue for the last twelve months as of Q2 2024 stood at $2.355 billion, with a revenue growth of 7.78%. This growth trajectory supports Citi's increased TTV estimates and expectations of accelerated onboarding of new logos.
The company's gross profit margin is notably strong at 59.02%, which is consistent with one of the InvestingPro Tips highlighting "impressive gross profit margins." This robust margin could provide GBTG with financial flexibility as it navigates the merger with CWT and integrates new digital bookings.
Another relevant InvestingPro Tip indicates that "net income is expected to grow this year," which aligns with Citi's maintained Buy rating and increased price target. This positive outlook is further supported by the tip that "analysts predict the company will be profitable this year," suggesting potential for improved financial performance.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights. Currently, there are 8 additional InvestingPro Tips available for GBTG, which could provide valuable context for the company's financial health and market position.
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