In afternoon trade their shares are up an impressive 12% and 14%, respectively.
Why are Flight Centre and Webjet shares zooming higher?
With no news out of either company, today’s gain could be in relation to speculation that a trans-Tasman travel bubble could soon be launched.
Premier Berejiklian wants this to happen sooner rather than later, commenting: “I’d like to see it happen this side of Christmas.”
And while Queensland Premier Annastacia Palaszczuk isn’t keen on opening her borders any time soon, Federal Tourism Minister Simon Birmingham suggested that these plans should not be held back by states.
Mr Birmingham told the Sydney Morning Herald that he wants Australia’s tourism industry to start its recovery from the pandemic with or without the support of the Queensland state government.
He said: “If New Zealand and some Australian states are ready and willing to progress, then the reluctance of other states to open up their domestic borders shouldn’t become an obstacle to progress.”
“The recovery of jobs and small businesses in some states shouldn’t be held back by the decisions of other state governments,” he added.
This potential travel bubble would be a big positive for travel booker such as Flight Centre and Webjet, as well as airline operators Qantas Airways Limited (ASX: QAN) and Air New Zealand Limited (ASX: AIZ).
While a full recovery will take some time, the sooner the market starts its slow recovery the better, as it will limit the cash burn these four companies are experiencing right now.
Should you invest?
While I am a big fan of Flight Centre and Webjet, I think their valuations are a little stretched right now. Especially when you factor in the dilution caused by their recent capital raisings.
However, patient investors might do well by holding onto their shares for the long term. But I’m going to be sitting this one out and focusing on other areas of the market which I think offer better value for money.