AI Automation And Curated Travel Packages Will Drive Stronger Long-Term Earnings Potential

Catalysts

About lastminute.com

lastminute.com is a European online travel company focused on dynamic holiday packages, flights and hotels, increasingly curated and personalized for leisure travelers.

What are the underlying business or industry changes driving this perspective?

• Ongoing shift toward online leisure travel planning and booking, combined with lastminute.com's strengthened leadership in core European markets and expanded presence in high potential countries, could support sustained revenue growth and scale benefits.
• Deeper customer relationships through a multi tier loyalty program, higher app adoption and improved brand recall across local brands may lift repeat rates and marketing efficiency, improving gross profit and potentially widening EBITDA margins.
• Rising consumer demand for curated, higher value package experiences, supported by pricing algorithms, ancillary upselling and theme based collections, may increase conversion and average booking values, supporting overall earnings potential.
• Automation and embedded AI across pricing, booking quality, customer operations and software development may help reduce unit costs and fixed cost ratios, supporting further EBITDA expansion and stronger free cash flow generation.
• Portfolio simplification, including exiting structurally unprofitable cruise activities and focusing capital on scalable segments and a B2B hotel distribution channel, may enhance business mix quality, lift net margins and support higher cash conversion.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming lastminute.com's revenue will grow by 8.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.8% today to 7.9% in 3 years time.
• Analysts expect earnings to reach €35.1 million (and earnings per share of €3.24) by about December 2028, up from €9.7 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €42.8 million in earnings, and the most bearish expecting €27.5 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 7.4x on those 2028 earnings, down from 14.7x today. This future PE is lower than the current PE for the GB Hospitality industry at 14.7x.
• Analysts expect the number of shares outstanding to decline by 1.2% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.16%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Industry wide leisure travel demand could weaken over the long term due to macroeconomic or geopolitical shocks, which would pressure lastminute.com's ability to sustain high teens revenue growth and dilute the visibility of reaching the medium term revenue ambition, directly impacting revenue and earnings growth trajectory.
• The strategy to reinvest heavily in marketing and expand in new markets may fail to generate sufficient incremental customer lifetime value, leaving the company with structurally higher customer acquisition costs and lower operating leverage, which would constrain net margins and EBITDA expansion.
• Shifts in online travel search behavior toward large language model interfaces and AI driven platforms may favor larger global aggregators, and if lastminute.com cannot maintain visibility as a preferred fulfillment partner, traffic volumes and conversion could deteriorate over time, reducing revenue and compressing gross profit.
• The execution risk in embedding automation and AI across pricing, booking quality, customer operations and software development is significant, and delays or technical issues could stall cost savings, keep fixed costs elevated and limit the improvement in EBITDA and free cash flow generation.
• Ongoing portfolio refocusing, such as the discontinuation of the loss making cruise division and the build out of a new B2B hotel distribution channel, may not fully offset the drag from underperforming activities and could expose the company to competitive and integration challenges, leading to lower net margins and weaker earnings than targeted.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of CHF19.88 for lastminute.com based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CHF22.01, and the most bearish reporting a price target of just CHF17.87.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be €443.5 million, earnings will come to €35.1 million, and it would be trading on a PE ratio of 7.4x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of CHF12.5, the analyst price target of CHF19.88 is 37.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.