The market could be undervaluing Web Travel Group Ltd (ASX: WEB) shares.

That's the view of analysts at Goldman Sachs, which see huge upside potential from the ASX 200 stock.

What is the broker saying about this ASX 200 stock?

Goldman notes that the business to business travel technology company released its half year results this week.

It was pleased with the result, highlighting that it came in ahead of expectations. In addition, it felt that management's explanation for recent margin weakness was sufficient and appears confident that a recovery will happen. Goldman said:

WEB announced 1H25 results ahead of GS expectations with Group TTV of A$2.6bn (+25% YoY, -1% vs GSe), Revenue A$170mn (+1% YoY, +2% vs GSe) and EBITDA A$70mn (-8%, +12% vs GSe). We believe that management addressed sufficiently the different factors driving the significant decline in WebBeds revenue margin (from 8.1% 1H24 to 6.6% 1H25) and gave clear guidance for FY25/26 to deliver a cautiously optimistic outlook.

Another key takeaway from the result was management's commentary on the WebBeds business. Goldman points out that this growing business' margins could improve markedly in the future. It adds:

WebBeds EBITDA margin reaching 50% by FY26: management noted that the WebBeds business is highly scalable and that expenses in 2H will be stable vs 1H and going forward the cost base is ~A$75% fixed and ~10% variable though difficult to flex and ~15% true variable cost. As a result, the company is confident to reach 50% from FY26 vs GS previous estimate of 46%.

Time to buy

In light of the above, the broker has revised its earnings estimates and boosted its valuation for the ASX 200 stock. Goldman explains:

Net net, we revise FY25e EBITDA from A$115mn to A$121mn (vs guidance range A$117-122mn). This is driven by little change to our FY25 Bookings/TTV/Revenue forecasts though we increase WebBeds EBITDA margin to 43% while Corporate Costs are reduced to A$19mn (from A$22mn). In FY26/27, our EBITDA margin increases to 48% from 46% previously on better cost leverage. Our valuation methodology is unchanged and our new TP is A$7/sh (vs prev A$6.7/sh), implying 46% TSR, reiterate Buy.

As you can see above, Goldman has reiterated its buy rating with an improved price target of $7.00.

Based on its current share price of $4.80, this implies potential upside of 46% for investors over the next 12 months.

No dividends are expected in FY 2025. However, Goldman believes that a 2.8% dividend yield is coming in FY 2026 and then 3.5% in FY 2027.