Where is the Flight Centre (ASX:FLT) share price going in 2021?

The Flight Centre Travel Group Ltd (ASX:FLT) share price looks set to have an eventful 12 months as the travel recovery begins…

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Earlier today I revealed that Goldman Sachs has initiated coverage on Webjet Limited (ASX: WEB) with a buy rating and a $7.36 price target. You can read about that here.

Webjet wasn’t the only company that the broker has been looking over. It has also taken a closer look at Flight Centre Travel Group Ltd (ASX: FLT) shares.

Where next for the Flight Centre share price?

According to the note out of Goldman Sachs, the broker is less bullish on the Flight Centre share price.

Goldman has initiated coverage on the travel agent’s shares with a neutral rating and $20.00 price target.

Based on the current Flight Centre share price, this price target implies potential upside of 6.4% over the next 12 months.

Goldman commented: “FLT is undergoing a significant transformation phase, with store and cost rationalization having been fast-tracked into 2020. The group now has a greater focus on online retailing and the corporate market, which broadens its addressable market from the slow-growing legacy business. We believe FLT is likely to emerge post COVID-19 with improved profitability, and see no major balance sheet risks. However, FLT is more exposed to risks around international travel recovery in the short term. We initiate with a Neutral and a 12-month TP of A$20.”

The bear and bull cases

The aforementioned neutral rating and $20.00 price target is based on international travel recovering from mid-2021, with economies like the UK/US taking the lead, and a strengthening over 2022.

Given the uncertainties, Goldman Sachs has also developed a bull and bear case which could impact its valuation for Flight Centre.

Bear case – Flight Centre price target $9.00

Goldman explained its bear case as follows:

“For the bear case, we assume that FY22 remains similar to FY21 and that international recovery does not begin until early FY23. This is largely in line with our macro team’s view that potential ineffectiveness of vaccines against a new strain could delay the timeline towards herd immunity by 10 months.”

Bull case – Flight Centre price target $29.05

As for the bull case, Goldman explained it as follows:

“For the bull case, we assume that international recovery is faster than expected. We assume that the activity levels to be achieved in 2HFY22 in our base case are achieved a half ahead, in 1HFY22, working off the scenario that international travel recovery follows immediately after the vulnerable populations have been vaccinated in most developed markets.”

Given the potential upside for the Flight Centre share price from the bull case, shareholders will no doubt be hoping this is the way things go over the next 12 months.

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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 Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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