It’s been a wild start to 2020 for Webjet Limited (ASX: WEB) and other ASX travel shares amid the coronavirus pandemic. Countries have shutdown incoming air traffic while even domestic borders remain shut to most travellers.
That’s bad for the travel business. Airlines are struggling and it makes sense that many of the other industry players are too.
But, the Webjet and Flight Centre Travel Group Ltd (ASX: FLT) share prices both rocketed higher yesterday. You might be wondering if it’s too early or too late to buy ASX travel shares. Here’s how I see the current market valuations playing out in 2020.
What’s going on with ASX travel shares?
It’s pretty obvious why the Aussie travel shares got sold down by investors in February and March. The situation looked pretty bleak for the industry for most of 2020, if not beyond.
But what’s causing double-digit share price moves right now? Webjet shares closed yesterday 15.56% higher at $4.16 per share while Flight Centre jumped 15.23% to $13.01 per share.
There were no major announcements from either ASX travel share on Monday. However, there is intense speculation that a trans-Tasman travel bubble could happen sooner rather than later.
That means these booking groups, as well as the airlines like Air New Zealand Limited (ASX: AIZ), could benefit from increased traffic.
On top of that, domestic travel restrictions are beginning to ease which could be a much-needed earnings boost for Webjet and Flight Centre.
Is it too early to buy Webjet shares?
Many investors are wary of false positives in the current market. While the ASX travel share rocketed higher yesterday, I’d be thinking if it’s too early rather than too late to buy.
Personally, I think it’s still to early to buy Webjet shares. There’s plenty of uncertainty facing the travel industry and no one knows what 2020 or 2021 look like in terms of traffic.
Even if borders do start to open, many people have lost their jobs and may not be able to afford to travel, or be comfortable with travelling.
That means the current valuation is a little too high for my liking. However, Webjet shares could be back in the buy zone if things start to get a little clearer this year.
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Returns as of 6th October 2020
Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. 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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