HomeToGo SE: Can Aggressive Expansion and AI Drive a Profit Turnaround by 2026?

Berlin-based HomeToGo SE (ETR:HTG) is betting big on growth to turn its financial corner by 2026. With a 46% annual revenue growth target, fueled by acquisitions, market expansion, and AI-driven efficiency, the company aims to shift from a €30.8M net loss in 2024 to a €7.3M profit by 2026. But can this ambitious strategy overcome mounting risks like shareholder dilution, margin pressures, and competitive saturation?

The Growth Engine: Acquisitions, AI, and Market Expansion

HomeToGo’s strategy hinges on three pillars:
1. Acquisitions: The pending acquisition of Interhome Group, a premium vacation rental provider, is poised to expand its high-margin listings and deepen ties with luxury travelers.
2. Market Expansion: Plans to enter eight new markets in 2025, targeting regions underserved by competitors like Airbnb, could unlock incremental revenue.
3. AI-Driven Efficiency: Investments in AI platforms to optimize listings, reduce marketing costs, and improve user experience are expected to boost margins.

These moves are already bearing fruit. In Q3 2024, HomeToGo’s Adjusted EBITDA hit a record €35M, with a 41% margin, while its B2B SaaS segment (HomeToGo_PRO) saw Adjusted EBITDA double year-on-year to €10.6M. The Booking Revenues Backlog—a metric of future revenue—surged to €37.4M, up 12% YoY, signaling strong demand.

The Financial Tightrope: Risks to the Profit Target

While the growth narrative is compelling, execution faces critical hurdles:

1. Shareholder Dilution

To fund its ambitions, HomeToGo may need equity financing, which could dilute existing shareholders. GuruFocus flagged 2 warning signs, though specifics remain unclear.

2. Margin Pressures

Despite a 93.85% gross margin, operational expenses have kept the company in the red. While AI and direct bookings aim to lower costs, marketing expenses remain stubbornly high, and cancellation rates spiked in Q3 2024, squeezing profits.

3. Competitive Saturation

The vacation rental market is crowded and price-sensitive. HomeToGo’s North American advertising business underperformed in 2024, highlighting reliance on volatile markets. Competitors like Airbnb and regional players are constantly innovating, leaving little room for error.

4. Debt-Free, But Not Debt-Proof

While debt constitutes just 0.5% of equity, the company’s cash reserves (€90M as of Q3 2024) offer a buffer. However, a prolonged downturn could force tough choices.

Valuation: A Discounted Ticket to Growth?

HomeToGo trades at a Price-to-Sales (P/S) ratio of 1.4x, far below its peers. Analysts at Snowflake estimate it’s 88.9% below its fair value, suggesting significant upside potential if growth targets are met. The stock’s 52-week range (€1.60–€2.47) reflects investor skepticism, but the €7.3M 2026 profit target implies a P/S compression to 0.5x, a realistic outcome for a breakeven firm.

Verdict: Buy the Dip, or Avoid the Trap?

HomeToGo’s aggressive growth strategy is high-risk, high-reward. On the one hand, its low debt, strong booking backlog, and AI-driven operational improvements position it to hit its 2026 targets. The Interhome acquisition and new markets could diversify revenue streams, while the HomeToGo_PRO segment’s 30–35% margin target offers a steady profit engine.

On the other hand, execution risks loom large. Shareholder dilution, margin volatility, and competition could derail progress. Investors must weigh whether the long-term upside—a potential P/S rebound and European leadership—justifies near-term losses.

Bottom Line: HomeToGo’s stock is a speculative play on its ability to scale profitably. For risk-tolerant investors, the 88.9% undervaluation and 46% revenue growth trajectory make it a compelling buy—provided they can stomach volatility and potential dilution.

Final Call: BUY with a €3.00 price target (15% upside), but monitor Q4 2024 results for clues on 2025 bookings and margin trends.