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Why the Flight Centre share price just sank 8% to a multi-year low

flight centre share price

The Flight Centre Travel Group Ltd (ASX: FLT) share price has continued its slide and is trading notably lower again on Friday.

In fact, this afternoon the travel agent’s shares dropped 8% to a multi-year low of $26.22.

When its shares hit that level, it meant they had lost 40% of their value since the start of the year.

Why is the Flight Centre share price sinking lower?

Today’s decline appears to have been driven by a broker note out of Ord Minnett this morning.

According to the note, the broker has downgraded Flight Centre’s shares to a lighten rating and cut the price target on them to $25.49.

Ord Minnett made the move due to concerns that the coronavirus could have a material impact on its earnings in 2020.

Whilst this isn’t new information, investors appear to have been spooked that the broker still feels its shares can go lower even after already falling so hard in recent weeks.

How is the coronavirus impacting Flight Centre?

Late last month Flight Centre released its half year results and provided an update on the impact that the coronavirus is having on its business.

It revealed that its Greater China and Singapore corporate businesses have been significantly impacted by the inbound and outbound travel shutdowns. It also added that its corporate businesses elsewhere in the world have been significantly impacted, particularly during the prior three weeks.

In light of this, the company downgraded its profit before tax guidance range to between $240 million and $300 million for FY 2020. This compares to its previous guidance of $310 million to $350 million.

However, with the coronavirus continuing to spread globally at a rapid rate and more travel bans or restrictions being announced, there are concerns that this guidance could be ambitious and another downgrade could be coming.

For the same reasons, both Corporate Travel Management Ltd (ASX: CTD) and Webjet Limited (ASX: WEB) have also hit 52-week lows or worse on Friday.

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Returns as of 6th October 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Flight Centre Travel Group 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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