Hostelworld (LSE: HSW) is a small-cap UK inventory that suffered through the pandemic 5 years in the past. As world journey got here to a standstill, the hostel-booking platform’s income fell off a cliff, driving the agency into the purple.

Nevertheless, with these darkish Covid days fortunately within the rear-view mirror, the share price has been steadily regaining misplaced floor. It’s gone from 77p again then to 136p, representing a achieve of roughly 79%.

But Metropolis brokers see additional potential positive aspects forward, and have a consensus price goal of 192p. That’s 40% larger than the present stage, although there’s no assure it should attain that price throughout the subsequent 12 months.

Apparently although, all seven analysts overlaying this small-cap inventory are very bullish, score it as a Robust Purchase.

What do they see in Hostelworld? Let’s take a look at some particulars.

Area of interest market

For these unfamiliar, Hostelworld is principally the Airbnb of hostels. It acts as a market, taking fee when travellers e-book lodging by way of its web site or app. 

The corporate has hostel companions in over 180 international locations, and youthful travellers make up the vast majority of bookings. In 2019, Hostelworld generated €80.7m in income and a internet revenue of €8.4m. Then it endured three years of losses earlier than returning to profitability in 2023 as world journey rebounded after the pandemic.

In 2025, it’s anticipated to report €97.5m in income and a internet revenue of €13.9m. So it’s managed to climate the Covid storm, and is rising as soon as once more.

Development plan

Constructing on this momentum, administration just lately set out a progress plan. The goal is for low double-digit income progress in 2026 and 2027, with an adjusted EBITDA margin above 20%, and adjusted free money circulate conversion of about 70%. 

The corporate has a powerful steadiness sheet, with no debt, and an €8m internet money place on the finish of 2024. The dividend has been reinstated, with a progressive coverage of 20%-40% of adjusted post-tax revenue, beginning within the second half of this yr.

It has additionally simply commenced a £5m share buyback programme.

Social community

One space the agency is seeing success in is its social community. This enables members to message, join, and meet up with like-minded travellers.

Launched in Q2 of 2022,  the community had 2.6m members by Q1 2025. These social members are reserving 2.2 instances greater than non-members over the primary 91 days after signing up. So there’s proof of sturdy community results rising right here. 

Hostelworld can even begin together with extra price range resorts and different lodging choices on its platform. Whereas that may spur progress, it additionally takes it additional into competitors with Airbnb, Reserving.com, and others.

Additionally, world journey demand may all the time be impacted by one other pandemic or some kind of world battle. So these are dangers to remember.

First rate valuation

That stated, I just like the social community angle, because it’s more likely to maintain customers loyal to the platform. I see a variety of monetisation potential.

Extra repeat bookings must also cut back advertising and marketing spend, which has already fallen from 58% as a share of income in 2022 to 46%.

Lastly, the inventory is buying and selling at simply 11 instances subsequent yr’s forecast earnings. Weighing issues up, I believe Hostelworld is value contemplating for buyers in search of an inexpensive small-cap inventory.