Morgan Stanley has cut its rating on HBX Group International Plc (BME:HBX) to "equal-weight" from "overweight" and lowered the stock's price target to €8 from €10.40, reflecting what the broker describes as heightened uncertainty around growth in the second half of the year and a softer outlook for the near term.
The downgrade follows an assessment of a more difficult operating environment for the company, with Morgan Stanley citing both disruption across Middle East travel markets and shifting commercial dynamics within HBX's business model.
Operational performance in the first quarter presented a mixed picture. HBX reported total transaction value - or TTV - growth of 16% in constant currency to €2 billion, a result the bank said was supported in part by greater use of third-party supply and promotional activity. Despite the pickup in bookings, underlying revenue growth lagged as the company saw pressure on take rates.
Specifically, HBX's take rate declined by 90 basis points to 8.4%, which translated into revenue growth of 5% in constant currency for the quarter. Morgan Stanley described this as "highlighting the active trade off HBX is making between TTV growth and take rates." The comment underscores the margin tension created when higher transaction volumes are achieved at lower monetization per unit.
Looking to the second quarter, Morgan Stanley expects TTV growth of about 7% year-on-year, or approximately 11% in constant currency, while anticipating total revenue to increase by only 1% in constant currency. The broker said these forecasts sit below consensus - roughly 2% under on TTV and 3% under on revenue for the quarter.
Exposure to the Middle East is a central concern in the bank's analysis. Morgan Stanley noted the region accounted for about 24% of TTV and 22% of revenue in the first quarter, "with roughly half linked to the Middle East." Hotel performance in the affected markets has deteriorated sharply in recent weeks, with some markets reporting revenue per available room down 50-60%.
On that basis, Morgan Stanley estimated that TTV in directly affected regions was down about 50% in the last month of the quarter, which it said contributed to the deceleration in growth. The brokerage also warned of broader implications for full-year targets, stating it sees "increased risk to the FY26 guidance" amid limited visibility and ongoing disruption.
Consequently, Morgan Stanley trimmed its FY26 forecasts for HBX: it reduced expected TTV growth in constant currency to about 12% from 14%, and lowered projected revenue growth to around 0.5% from 2.1%.
Company management had said second-quarter trading began well, with January booking momentum continuing and a "satisfactory" level of bookings secured. At the same time, management cautioned that it was "too early to assume a 1Q-like run-rate continued." That caution aligns with Morgan Stanley's more conservative near-term assumptions.
On valuation, Morgan Stanley noted that HBX trades at about 6.6x calendar year 2026 adjusted price-to-earnings, but the bank concluded there is "no clear catalyst for a rerating" given the uncertainty in global travel markets and rising execution risk associated with the company's shift toward increased third-party sourcing.
Implications
The downgrade and reduced guidance reflect a combination of margin compression from lower take rates, reliance on third-party supply, and concentrated geographic exposure to volatile travel markets. These factors are central to the broker's reevaluation of both near-term revenue prospects and FY26 outcomes.