Regulation And Rivals Will Choke Growth Yet Bring Promise

Key Takeaways

• Heavy dependence on third-party inventory and exposure to regulatory changes pose risks to future growth, margin improvement, and supply quality.
  
• Intensifying competition, high customer acquisition costs, and pressured travel demand threaten market share and the path to sustained, recurring earnings.
  
• Strategic focus on profitability, complex acquisitions, currency exposure, and intense competition threaten HomeToGo's ability to sustain revenue growth, margins, and long-term scalability.

Catalysts

Operates a marketplace for vacation rentals that connects users searching for a place to stay in Luxembourg and internationally.

• While HomeToGo is experiencing rapid growth in its HomeToGo_PRO B2B segment, expanding SaaS and tech-enabled service revenue streams with strong scale effects, the business remains acutely exposed to the risk of increased regulation and government intervention in key short-term rental markets, which could reduce available inventory and directly curtail future booking volumes and revenue growth.
  
• Even though digital payments adoption is accelerating, with HomeToGo Payments now processing nearly one third of marketplace GBV and supporting improved net margins and free cash flow, persistent macroeconomic uncertainty and higher interest rates may restrain discretionary travel spending for an extended period, suppressing top-line growth and delaying margin expansion.
  
• Although proprietary technology investments in AI-powered search, dynamic pricing, and platform integration have improved conversion rates and allowed for higher marketplace take rates, HomeToGo's heavy reliance on third-party property supply and lack of exclusive inventory control leaves it vulnerable to supply quality issues and could limit further margin improvement in the long term.
  
• While broader consumer trends show Millennials and Gen Z continuing to shift preference from traditional hotels to alternative accommodations-an industry tailwind-escalating competition from large, vertically integrated travel platforms like Airbnb, Expedia, and Booking.com threatens to erode HomeToGo's market share and negotiating leverage, posing risks to sustained revenue and earnings growth.
  
• Despite the planned integration of Interhome, set to expand HomeToGo's direct inventory and operational capabilities, the company's customer acquisition costs remain high in an increasingly competitive landscape; if platform loyalty and repeat usage do not improve, elevated churn could undermine efforts to build a steady base of recurring earnings.

HomeToGo Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on HomeToGo compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming HomeToGo's revenue will grow by 29.2% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -17.1% today to 4.6% in 3 years time.
• The bearish analysts expect earnings to reach €21.6 million (and earnings per share of €nan) by about August 2028, up from €-36.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 36.3x on those 2028 earnings, up from -7.6x today. This future PE is greater than the current PE for the DE Hospitality industry at 23.1x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.15%, as per the Simply Wall St company report.

HomeToGo Future Earnings Per Share Growth

Risks

• Around 20% of group revenues are exposed to currency fluctuations, with recent revenue growth hindered by a weaker US dollar, meaning HomeToGo's revenue and profitability are vulnerable to continued or worsening foreign exchange headwinds.
  
• Management's clear strategic prioritization of profitability over growth in the core marketplace segment resulted in only marginal booking revenue growth of 1%–2% and even a slight decline in the most recent quarter, suggesting that without renewed marketing investment or stronger organic traction, long-term revenue growth could stagnate.
  
• HomeToGo remains highly reliant on the successful integration and long-term value delivery of recent acquisitions (such as Interhome and ferienhaus.de), and should the anticipated synergies or operational carve-outs prove more costly or complex than planned, both revenue and EBITDA expectations could be negatively impacted over time.
  
• In the growing B2B segment, despite strong top-line expansion, management is deliberately prioritizing growth over profitability, resulting in declining half-year segment EBITDA, which if not reversed as the business scales could imply ongoing pressure on overall company earnings and margins.
  
• The vacation rental industry is characterized by intense competition and commoditization, with major players like Airbnb, Booking.com, and Expedia holding significant market share and negotiating power. This competitive landscape, combined with the risk of direct bookings and increased standardization, may compress HomeToGo's take rates and margins and limit the company's ability to scale revenues and profitability in the long term.

Valuation

• The assumed bearish price target for HomeToGo is €3.1, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of HomeToGo's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €5.2, and the most bearish reporting a price target of just €3.1.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be €465.8 million, earnings will come to €21.6 million, and it would be trading on a PE ratio of 36.3x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of €1.62, the bearish analyst price target of €3.1 is 47.7% 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.