We maintain our $10 per share fair value estimate for narrow-moat SiteMinder SDR. Revenue growth during the first half of fiscal 2025 is tracking below our and management’s expectations for the full year, coming in at 17% on the previous corresponding period, or PCP, on a constant-currency basis. Management’s guidance is for 30% organic annual revenue growth over the medium term. Shares sold off sharply on the result and screen as materially undervalued. We continue to expect revenue growth to reaccelerate in the near to medium term and achieve management’s 30% target in fiscal 2027.

Despite the selloff, there was a lot to like about the result. SiteMinder's number of customers continued to grow, at 14% growth on the PCP, which was near our forecast for 13%. Moreover, the company has been increasingly pursuing larger hotel customers, as they have a larger gross booking value, or GBV, which can be monetized via the company’s new products. The success of this strategy is evidenced by room growth materially outpacing customer growth, at over 50% growth on the PCP. A slight decline in subscription revenue per customer is a partial offset, as SiteMinder provided incentives for larger hotelier customers.

Importantly, SiteMinder achieved its customer growth while keeping the customer acquisition cost, or CAC, steady, at around $4,500 per subscriber. The company is seeing increasing returns per dollar spent on CAC. This is also reflected in the lifetime value to CAC ratio, which increased to 6.1, up from 5.3 in the PCP. This means SiteMinder expects to generate around $6 in gross profits for every dollar it spends on sales and marketing over the lifetime of a customer, which we estimate sits at around eight years. For reference, a lifetime value/CAC ratio of 3 is the benchmark for what is considered strong for a software-as-a-service, or SaaS, company.

Business strategy and outlook

We expect SiteMinder’s strategy to be wide-ranging, including a focus on attracting new customers, increasing penetration of its current product suite, and developing and launching new products. We view SiteMinder’s strategy as appropriate, despite its wide-ranging nature, as all three focus areas provide large and highly winnable opportunities.

We expect SiteMinder to take significant market share within the hotels industry. SiteMinder’s market share among hotels currently sits in the midsingle digits, yet SiteMinder is the leader in its space, and has twice the market share of its closest competitor. We expect scale-based cost advantages to drive consolidation in the channel manager industry, as subscale players are pushed out of the market and scaled providers, like SiteMinder, take share. Specifically, we expect SiteMinder to take dominant market share in larger single-location hotels, and in hotel chains outside of the largest chains.

We also expect SiteMinder to increase its take rate through increased penetration of its existing product suite, especially through adoption of its transaction-based products. We estimate transaction-based revenue currently makes up around 10 basis points of the gross booking value, or GBV, of SiteMinder’s customers. For comparison, SiteMinder Pay has a take rate of around 2%-3% of payments that are processed through a hotel’s website or, from fiscal 2025, also on payments processed at a hotel’s premises. Similarly, SiteMinder Demand Plus has a take rate of 15% on incremental demand generated through search engine optimization.

Finally, we expect SiteMinder’s new products to be significant growth drivers, especially Channels Plus. We expect Channels Plus, which aggregates several smaller channels into a single channel, will see rapid adoption among SiteMinder’s existing customers, and help attract new customers. Although the take rate of this product is like that of payments, we expect its uptake to be much higher, due to its more differentiated nature, as well as the clear value it provides.

SiteMinder bulls say

  • SiteMinder is the world’s largest e-commerce software provider for the global hotel industry, at twice the size of its nearest competitor.
  • SiteMinder has a large and highly winnable market opportunity, consisting of increased market penetration, product penetration, and increased digitization of the hotel industry through new products.
  • SiteMinder’s Channels Plus product is a unique and highly valuable product that will accelerate customer acquisition and take-rate expansion.

SiteMinder bears say

  • SiteMinder’s end markets are highly cyclical.
  • SiteMinder’s market share currently sits in the midsingle digits, which leaves significant room for new competitors to come in.
  • SiteMinder has a history of losses and may struggle to achieve profitability.

Get more insights from Morningstar in your inbox

Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company's future cash flows, resulting from our analysts' independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn more about how to identify companies with an economic moat, read this article by Mark LaMonica.