Shore Capital sees major upside at Hostelworld

(Sharecast News) - Shore Capital has reiterated its 'buy' rating for Hostelworld, hailing the group's social network-led transformation and recent investments to drive long-term growth. The broker gave the stock a fair value estimate of 230p, suggesting significant upside from Friday morning's price of 118p, down 0.4% on the day.

Analysts said Hostelworld has built a "strong foundation of trust" between its customers and suppliers, which is reflected in its performance since Covid, with bookings, revenues and adjusted EBITDA now all back above FY19 levels.

The company's member network - 80% of group bookings from its 2.6m-member network - and content-rich social booking platform are now a valuable part of its investment case, helping retention rates and engagement with the brand, Shore Capital said.

"HSW has built a leading tech-led travel business, which differentiates itself from other OTAs due to its high expertise in hostels, key industry relationships, and now social features. We believe this provides a solid foundation for scaling the business, while retaining an asset-light, cash-generative structure," the broker said.

Shore Capital also highlighted Hostelworld's ambitions to expand its current market coverage - through opportunities in Latin America and Asia - as well other enhancements such as a new ranking system to boost commission rates and a new low-cost customer acquisition channel.