Motley Fool Australia

Why the Flight Centre (ASX:FLT) share price and Webjet (ASX:WEB) share price are taking off

jet plane representing flight centre share price about to take off on runway
Image source: Getty Images

The market is running hot and it’s the Flight Centre Travel Group Ltd (ASX: FLT) share price and Webjet Limited (ASX: WEB) share price that’s rebounding strongly.

The S&P/ASX 200 Index (Index:^AXJO) rallied nearly 2% at the time of writing to break a four-day losing streak.

The market was sold off on resurging global COVID-19 worries but bargain hunters couldn’t help themselves today.

Biggest losers have most to gain

This explains why the pandemic-stricken travel sector is seeing some of the best comebacks, especially with some experts voicing hope for a vaccine in 2021.

The ASX stocks most heavily sold-off during COVID will logically be the ones leading any recovery (assuming they survive). It’s clear that value buyers are trying to get on this trade early.

The FLT share price surged over 5% to $13.51 in the last hour of trade while the WEB share price gained 2.5% to $3.67.

FLT share price and WEB share price not alone in rebound

They aren’t alone. The Qantas Airways Limited (ASX: QAN) share price flew 3.6% higher at $3.90 and Sydney Airport Holdings Pty Ltd (ASX: SYD) rose 3.7% to $5.74.

Six months from now, we could be looking back and wishing we bought travel stocks during the September sell-down.

This is despite the fact that international borders are unlikely to reopen fully till late 2021, if not 2022.

Easing border restrictions boosting confidence

But news that South Australia is welcoming News South Wales residents with open arms is giving investors just enough optimism to refuel the rally.

Meanwhile, the 14-day rolling average of new COVID-19 cases in Victoria dropped below 30. There’s talk that Queensland premier Annastacia Palaszczuk will be under intense pressure to allow Victorian holiday makers back in sooner rather than later as her government is facing a huge budget deficit.

The Flight Centre share price and Webjet share price may be more dependent on international travel, but the removal of state border restrictions may be enough to keep them in the air.

Should you buy Flight Centre and Webjet?

Both stocks have lost around 70% of their value since the start of calendar 2020. This compares to the 47% dive by the QAN share price and a 13.5% decline by the ASX 200.

Lucky for these stocks, recent emergency capital raisings means they should have enough of a cash runway to ride out the COVID mayhem.

I would even hazard a guess and say there could be merger and acquisition upside for both. Nothing like a crisis to force mergers, and there have been stranger bedfellows.

But be forewarned, buying these ASX COVID casualties aren’t for the faint hearted. These stocks are likely to face more turbulence than many other parts of the market for a while yet!

Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.

*Returns as of 6/8/2020

Motley Fool contributor Brendon Lau owns shares of Webjet Ltd. Connect with me on Twitter @brenlau.

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.

Related Articles...