Hostelworld (LSE:HSW) has upgraded its 2023 earnings guidance after generating record annual turnover due to a surge in global bookings, it said in a trading update today.
Now could be a good time to buy shares in the company, according to analysts, who believe there could be further headroom in Hostelworld (LSE:HSW)’s share price, which lifted to 120p per share after a slight uptick this morning.
The travel company raised its earnings before interest, tax, depreciation and amortisation (EBITDA) forecast to between €17.5 million and €18 million for the year, up from prior guidance of up to €17 million.
This was after it recorded the largest revenue on record for the year to date, with some regions now ahead of pre-pandemic levels.
Analysts responded in kind, expecting the company’s revenue to be above forecasts for the year while lifting their earnings forecasts.
Capital markets analysts at investment group Shore Capital said “continued momentum in the group has been driven by booking strength, value and cost focus”, and that they expect further “progress on its growth strategy”.
Analysts calculate there is a 48% potential upside in Hostelworld (LSE:HSW)’s stock, based on the 175p price where they would view the shares to be fairly valued, according to a Shore Capital broker note.
Hostelworld (LSE:HSW) said its net revenue soared 38% to €75.2 million for the year through to the end of September, with its gross merchandise value also increasing by the same percentage (to €496.4 million).
Net bookings were up 42% year on year at five million, across all regions, with Southern Europe, Asia and Oceania now ahead of pre-pandemic levels.
However, the company’s average booking value was down 4% at €14.94, as growth in Asian bookings was partly offset by inflation in the price of beds.
“We continue to see growth in the proportion of bookings made by social members in Q3 (59% in September) and continued growth in year over year market share through the quarter,” said Gary Morrison, Hostelworld’s group chief executive officer.
“Collectively, these operational results are driving an improved EBITDA outlook for the year, and a further reduction in our net debt position and interest rates for the balance of the year.”
Shore Capital’s analysts reiterated their ‘buy’ recommendation for Hostelworld shares, saying they expect the company to post a “slight improvement” on forecasts of €91 million net revenue in fiscal 2023, which unchanged would represent a year-on-year increase of 30.7%.