On Thursday, Citi maintained a positive outlook on Global Business Travel Group Inc. (NYSE:GBTG), raising the price target to $10.00 from the previous $9.50, while keeping a Buy rating on the stock. The adjustment follows the company's recent financial performance, which included a modest top-line growth coupled with a substantial beat on adjusted EBITDA and margin improvement.
The company reported a 5% increase in revenue, supported by only a 1% rise in operating expenses, thanks to ongoing efficiency efforts such as automation and artificial intelligence. Global Business Travel Group also noted a robust growth in market share, driven by a surge in demand for its software and services, as evidenced by $3 billion in new wins over the last twelve months and a high retention rate of 97%.
Total (EPA:TTEF) transaction value (TTV) grew by 9% year-over-year to $8 billion, spurred by approximately 5% growth in transactions and higher average pricing for tickets and hotel rates. The growth was particularly strong in the Global Multinational Network (GMN) segment, with an 8% increase year-over-year, while growth in the Small and Medium Enterprise (SME) segment remained subdued at 2% year-over-year, albeit an improvement from the previous quarter.
In light of these results, Global Business Travel Group has tightened its full-year revenue and adjusted EBITDA outlook. Moreover, the company has increased its full-year free cash flow projection to $160 million, up from the earlier improved forecast of over $130 million.
The revised price target of $10 reflects the improved free cash flow conversion and a slightly reduced weighted average cost of capital (WACC), as per the analyst's comments. The company's recent performance and optimistic financial adjustments underscore its ongoing market share expansion and operational efficiency.
In other recent news, American Express (NYSE:AXP) Global Business Travel (Amex GBT) reported a strong third quarter in 2024. The company's earnings call highlighted a 5% increase in revenue, reaching $597 million, and a significant 23% jump in adjusted EBITDA to $118 million. Furthermore, Amex GBT also announced the successful execution of its first share buyback.
Among other key developments, the company's transactions increased by 5%, with total transaction value rising by 9% to nearly $8 billion. The company also maintained a 98% customer retention rate and reported $3 billion in new wins. Looking forward, 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.
In terms of future expectations, Amex GBT has narrowed its revenue guidance for 2024 to between $2.415 billion and $2.435 billion. The company also plans to invest an additional $35 million, maintaining a 75/25 split between operating and capital expenditures.
InvestingPro Insights
Global Business Travel Group Inc. (NYSE:GBTG) continues to demonstrate strong financial performance, aligning with Citi's positive outlook. InvestingPro data reveals that GBTG has achieved impressive gross profit margins of 59.51% in the last twelve months as of Q3 2024, reflecting the company's efficiency in managing costs while growing revenue. This is particularly noteworthy given the 4.98% revenue growth over the same period, reaching $2.38 billion.
InvestingPro Tips highlight that GBTG's net income is expected to grow this year, which supports the company's tightened full-year outlook and increased free cash flow projection. Additionally, the stock has shown significant returns, with a 25.56% price increase over the last three months and a substantial 50.45% return over the past year, indicating strong investor confidence in the company's trajectory.
These insights complement the article's discussion on GBTG's market share growth and operational efficiencies. For investors seeking a deeper understanding of GBTG's financial health and potential, InvestingPro offers 11 additional tips, providing a comprehensive analysis to inform investment decisions.
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