It's not valuation concerns that are causing Flight Centre Travel Group Ltd (ASX: FLT) to loses more ground today with the stock free falling to a four-month low in late morning trade.
Shares in the travel agency tumbled 5.2% to $35.55, making it the worst-performing stock on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
This takes its two-day loss to nearly 19% since it revealed a shock profit warning with underlying pre-tax profit coming in between $355 million and $365 million compared with management's earlier forecast range of $360 million and $390 million.
The news triggered a rush of downgrades by analysts with no less than three brokers cutting their recommendation on the stock to "neutral" from a buy-equivalent rating.
But the stock's extended slide in value is probably due more to tax-loss selling than it is about its valuation as the lowered price targets from these brokers all stand well above the current share price.
Credit Suisse dropped its target to $39, Macquarie lowered its target to $38.96 and JPMorgan pegs fair value at $38.30 a share.
Another broker, Morgans, even suggested that Qantas Airways Limited (ASX: QAN) makes a more attractive stock to buy.
Flight Centre is starting to look oversold at current levels as it is trading around a 13x price-earnings multiple when it has historically traded in the high-teens, but I won't rush to buy it because I think the competitive advantage Flight Centre has enjoyed over its rivals, particularly online travel companies like Webjet Limited (ASX: WEB), may be eroding.
Flight Centre, which is more bricks and mortar than online, has managed to beat web-based "disruptors" because it can cater to strong demand from Australians looking to go on multi-destination holidays.
Arranging accommodation and flights with multiple stopovers is difficult to do on the internet on your own, particularly if going to unfamiliar locations. That's where Flight Centre's sales consultants have an edge.
However, the latest profit downgrade shows that outbound tourism is falling due to a weakening Australian dollar, poor consumer confidence and worries about rising unemployment.
These headwinds are likely to persist well into 2015-16 if not beyond, and that means Flight Centre can't count on this edge giving them the same financial advantage as it once did.
What's more, online travel sites are getting better at catering to multiple destination holidays and Australians are getting better educated about how to plan such getaways.
The online business disruption that has crippled other industries like media may finally be catching up with Flight Centre.
This doesn't mean investors should be panic selling the stock. Flight Centre's US and UK operations are growing well from a low base and it has a strong balance sheet.
But these won't be enough to save the stock from a de-rating. While investors were happy to pay a close to 20x P/E for the stock before, the more appropriate multiple could be 12-13x.
This suggests Flight Centre may only become a value buy under $30.
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