On Monday, Web Travel Group Ltd (ASX: WEB) shares started the week with an almighty drop.

The ASX 200 stock lost almost 36% of its value to end the session at a 52-week low of $4.53.

Investors were selling the business to business travel company's shares after it released a trading update which fell well short of expectations.

Broker reaction

Analysts at Goldman Sachs have been looking over the update and wre disappointed with what they saw. They said:

WEB pre-announced 1H25 results (Mar to Sept 2024) this morning with a downgrade to: 1) the 1H25 WebBeds revenue margin to 6.4% from ~7.0% cited at the recent AGM; and 2) 1H25 EBITDA margin to ~44% from ~50% (also noted at the recent AGM). The key reason for this was further weakness in Europe's revenue margins, which could be more structural vs one-off, as highlighted at the AGM.

In response, the broker has cut its revenue and earnings estimates for the ASX 200 stock through to FY 2027. Goldman explains:

On the back of WEB's profit-warn on 14th October, we cut WEB FY25/26/27 Revenue/EBITDA/EPS by 9-10%/18-26%/ 21-33%. […] Reflecting the above, we keep our TTV estimates unchanged in FY25/26 at A$5B/A$6B respectively but with FY25/26 revenue margin reduced to 6.5%/6.5% (vs prev 7.3%/7.2%) and WebBeds EBITDA/Revenue margins to 43%/46% (vs prev ~50%).

Should you buy this beaten down ASX 200 stock?

Despite slashing its revenue and earnings estimates, Goldman is still forecasting strong growth in the coming years and sees significant value in Web Travel Group's shares.

In respect to the former, it said:

Our view of market consolidation in a fragmented but robustly growing hotel wholesale market remains intact with WebBeds TTV of ~15% CAGR from A$5B in FY25 to A$10B in FY30. […] After re-basing revenue margins to 6.5% in FY25e, we forecast moderate deterioration to 6.3% in FY30e due to APAC/US higher sales mix but expect Europe margins to be largely stable from here.

In light of this, the broker has retained its buy rating on the ASX 200 stock with a reduced price target of $6.70 (from $8.20). Based on its current share price of $4.53, this implies potential upside of 48% for investors over the next 12 months. Goldman concludes:

Our valuation methodology is unchanged and trading at FY25e P/E of 18x vs FY24-27e EPS CAGR of 10.1%, which is still undemanding relative to our broader ANZ Consumer coverage.