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Why Flight Centre Travel Group Ltd (ASX:FLT) shares surged higher today

The market may have sunk notably lower today, but not all shares have fallen along with it.

The Flight Centre Travel Group Ltd (ASX: FLT) share price has been an exception and has surged higher.

In afternoon trade the travel agent giant’s shares have risen 4% to $64.78.

Why are Flight Centre’s shares surging higher?

With no news out of the travel agent, today’s gain appears to be attributable to a broker note out of Morgan Stanley.

Although the broker has retained its equal-weight (neutral) rating on the company’s shares, it has lifted its price target by a massive 26% from $54.00 to $68.00.

According to the note, the broker has been impressed at the way Flight Centre has successfully shifted its focus from just the leisure market to a combination of leisure and corporate travel.

Morgan Stanley believes that the shift is a good one because it is less likely that its corporate segment will suffer from short term earnings disruptions like its leisure segment.

Further to this, the broker sees an opportunity for Flight Centre to grow its business in the United States. At present the company generates just 10% of its earnings in the massive market, but this could grow to be a much larger contributor in the future.

Should you invest?

Based on Morgan Stanley’s forecast for earnings per share of $2.77 on FY 2018 and $3.24 in FY 2019, Flight Centre’s shares are changing hands at just under 20x forward earnings.

While this isn’t particularly expensive, it isn’t necessarily cheap either. As a result, I would agree with the broker that its shares are a hold at this point.

Instead, I would be a buyer of either Helloworld Travel Ltd (ASX: HLO) or Webjet Limited (ASX: WEB) which I think are better value for money given their respective growth profiles.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited. The Motley Fool Australia owns shares of Helloworld Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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