Shares of Sabre (NASDAQ:SABR) took flight Monday, climbing 11% as of 3:25 p.m. EDT, on optimism surrounding the tech company's airline customers. The market thinks the airlines are going to get another round of government stimulus, and this is good news for Sabre and other companies that rely on the sector for revenue.
Airline revenue has plummeted due to the pandemic, and that in turn has taken its toll on companies like Sabre, a one-time American Airlines Group subsidiary that runs airline ticketing and reservation systems. Sabre's shares are down 70% year over year as a result of COVID-19.
But Monday was a "risk-on" day for companies impacted by the pandemic as investors embraced weekend comments from lawmakers suggesting we could see a deal come out of Washington providing a second round of stimulus. Airlines jumped 5% or more on the news, and Sabre shares joined in the rally.
The company's shares also received a positive mention by analyst Ashish Sabadra at Deutsche Bank, who wrote in a note that, while the virus will weigh on near-term results, increased testing, a lifting of quarantines, and pent-up demand could fuel incremental bookings growth.
Sabadra rates Sabre as a hold.
Given the challenges the company faces, a hold seems about right. In August it reported a worse-than-expected second-quarter loss due to airline weakness, and it will likely be unable to fully recover until the airlines do. That could be 2022, if not later, meaning Sabre shareholders could be in for a long wait.
That said, this is a solid company that under CEO Sean Menke has taken steps to cut costs and revitalize its business. And as Sabadra notes, while a full recovery might take years, there are plenty of potential catalysts in the months to come that could provide a gradual boost.
It's hard to get too excited about Sabre shares right now, but given the damage already done and the underlying strength of the business, those who are still on board should sit tight and ride out the turbulence.