Will the Saga share price reach 500p in 2021?

first_img Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Enter Your Email Address Will the Saga share price reach 500p in 2021? Image source: Getty Images. Shareholders in Saga (LSE: SAGA) have had a rough ride over the past couple of years. It had already warned on profits in 2019, even before its travel business was hit by pandemic. The travel and insurance group focusses on a target market of older customers. They are often well-heeled, so the business model of specialising in this group and gaining their loyalty makes sense.The Saga share price has doubled since October. But can it now double again and reach 500p in 2021?5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…The case for SagaThe basic business model of the company is one of its attractive features. Older people who have saved money for decades are a good target market for high-end travel as well as insurance products. By focusing on them, Saga is able to build its reputation among such customers. It can understand their needs better and so respond well to them.For many decades the model worked well. However, over the past couple of years the company stuttered. The pandemic impacted its travel business heavily. However, the resilient insurance business provides some counterbalance. Last week the company reported that even with the pandemic headwinds, it expects to report a full-year underlying profit before tax.Given the current Saga share price, that will likely tempt some bargain hunters to bet on a price appreciation.I won’t touch Saga yetBy contrast, I have no plans to buy Saga shares for the foreseeable future. The shape and size of its recovery just remains too unclear. I also think the pandemic has shown up a weakness in its business model – the reliance on persuading shiploads of older people to travel together. That worked well before the pandemic, but the world has changed. It remains to be seen how long it will be before demand for cruises among more vulnerable holidaymakers returns. It bought two ships over the past couple of years, so the longer the older cruise market is weak, the more Saga will suffer.The company has said it does not plan to pay dividends for the next few years. Based on its goal of reducing leverage, I don’t expect any dividends until 2024 at the earliest. That damages the investment case for the company. That is one reason I think share price recovery will be slower than it otherwise might.The Sage share price isn’t just about demand recoveryMeanwhile, although the company is in compliance with its banking covenants, its balance sheet remains weighed down by debt. So any recovery in the travel business won’t necessarily be reflected in short-term value creation for shareholders. The Saga share price has been damaged by weak performance, but it won’t necessarily jump up just because business performance improves.To get to 500p, I expect the company would need to show rapid recovery in its travel business, as well as continued strength in insurance. Even then I think it would be a rich valuation. I don’t expect cruise demand among older travellers to recover quickly, although widespread vaccination could help bring back demand sooner than I expect. I do not therefore see clear drivers to push the share price to 500p this year. That is why I won’t be buying Saga shares any time soon. Simply click below to discover how you can take advantage of this. Our 6 ‘Best Buys Now’ Shares christopherruane has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.center_img I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. “This Stock Could Be Like Buying Amazon in 1997” I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! See all posts by Christopher Ruane Christopher Ruane | Wednesday, 3rd February, 2021 | More on: SAGA last_img read more