This travel stock has plunged on AI concerns. Why BMO says buy the dip

Navan stock could rebound sharply as investor concerns about AI disruption appear overblown, according to BMO Capital Markets. The bank initiated the corporate travel and expense platform at an outperform rating. Analyst Daniel Jester’s $13 price target implies an upside of 48% ahead. Shares of Navan have plunged 48% this year, with Jester attributing this pullback to worries about the durable growth trend and potential disruption from AI tools. They have sunk 65% since the company’s IPO in October, which was priced at $25. NAVN 1Y mountain NAVN 1Y chart “Navan’s IPO late last year was followed by a near perfect storm of macro-driven risks and uncertainty as investors evaluated the impact of emerging AI technologies on application software businesses,” Jester wrote. “We think the near-term implications for the [travel and expense] market are less than feared and less than what appears to be embedded into the stock at current levels. We believe Navan can gain share in a market where it still has low penetration of global business travel bookings.” The analyst added that Navan has a low-single digit share of global business travel bookings planned on their platform. This figure has grown 36% over the last 12 months. Jester expects Navan to grow at least 23% in the coming year as the company cross-sells its broader platform beyond travel and as legacy providers fuel share gains. While Jester acknowledged investors’ AI fears, he also said that these concerns may be unfounded. “Evidence to date of this threat is still inconclusive to us, with few agentic solutions in market and no evidence in our channel checks that business customers are looking to defect from tools like Navan to generic AI workflows or new ‘native’ AI tools,” he wrote. “With a business model that offers a hybrid of automation and human travel agents, we think the Navan playbook has similarities with Intuit, where despite growing people to support growth, margins continue to expand at a healthy pace, a playbook we think Navan can emulate.” Jester added that while Navan’s valuation is not the only factor behind his rating, it’s certainly a tailwind due to the pullback in the stock since its IPO. “Comparing its financial profile against peers in software, financial software, or even consumer travel-centric stocks, Navan shares appear attractively valued given the current business trajectory of high-20s revenue growth. With execution and our expectation of upside tension to estimates, we see potential for shares to narrow some of the discount on the multiple,” he added.