The Webjet Limited (ASX: WEB) share price is trading lower on Thursday. At the time of writing, the online travel agent's shares are down 4% to $4.52.
This means the Webjet share price is now down 29% from its 52-week high.
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Is the Webjet share price in the buy zone?
According to a note out of Goldman Sachs this morning, its analysts believe the Webjet share price is in the buy zone.
Goldman has reiterated its buy rating but trimmed its price target on Webjet's shares to $6.40 following the release of its full year results on Wednesday.
Based on the current Webjet share price, this implies potential upside of 44% over the next 12 months.
What did Goldman say?
The note reveals that Webjet fell 9.7% short of the broker's revenue expectations during FY 2021. This was due to a weaker than expected performance from its Webbeds business.
However, thanks to lower than forecast costs, Webjet outperformed its earnings before interest, taxes, depreciation, and amortisation forecast by 5.5% over the period.
Commenting on the result, the broker said: "We observe no key concerns in regard to the longer term strength of the business which remains a key driver of our positive thesis on Webjet. WEB reported improved revenue margins in the B2B segment vs. 1H21, alleviating concerns around structural shifts in industry margins. However, in the near term recovery has been slower than expected. We expect shorter dated travel bookings to also be a contributor to this factor. However, we make negative revisions in our short term earnings, especially in the Europe B2B business."
Earnings estimates
Looking ahead, Goldman has revised its earnings estimates lower to reflect the slower recovery.
Instead of earnings per share of 5 cents in FY 2022, it now expects a loss of 2 cents per share. After which, it is forecasting earnings per share of 18 cents in FY 2023 and then 28 cents in FY 2024.
Based on these forecasts, the Webjet share price is trading at 25x FY 2023 earnings and 16x FY 2024 earnings. While this isn't cheap, the broker believes it is good value given its strong long term growth potential.
