Here’s why the Webjet (ASX:WEB) share price moved in circles during July

The digital travel business is going back into hibernation mode.

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The Webjet Limited (ASX: WEB) share price is still in the doldrums following a subpar performance over the course of July.

The online travel operator’s shares are up 2.4% since this time last month. However, on the first day of trading in August, the Webjet share price closed down 0.4% to $4.99 for the day, after dropping to $4.93 during intraday trading.

With no recent news out of the company, we take a closer look at what could be affecting its shares.

What’s going on with the Webjet share price?

Investors appear to have mixed feelings when it comes to valuing Webjet shares in the current COVID-19 climate.

During July, Webjet faced a massive setback with roughly half of Australia’s population going into lockdown again. The New South Wales, Victorian and South Australian governments all enforced shutdowns. In fact, it was Victoria’s 5th lockdown since the pandemic began in March 2020.

The closed borders saw nearly all people banned from flying interstate unless they had special exemptions. This is particularly worrying as Webjet is relying on domestic travel to generate revenue to see the business through. Before COVID, the Sydney to Melbourne air route was once considered the 3rd busiest route in the world.

Adding to the company’s woes, New Zealand has suspended quarantine-free travel for Australians as a result of the latest outbreak. This is likely to affect Webjet’s revenue stream as fewer people will be travelling internationally.

Late last week, the Australian federal government announced its plans to have 70% of the country’s population vaccinated before moving to Phase B of its coronavirus response. This phase relates to seeing restrictions such as lockdowns and border controls eased on vaccinated residents.

However, the government’s provided no timeline, saying it’s difficult to predict when Australians will come forward to get vaccinated.

The unfolding situation has weighed heavily on Webjet shares while the S&P/ASX 200 Index (ASX: XJO) reached fresh new highs.

One broker who remains bullish on Webjet shares is Swiss investment firm UBS. The broker raised its 12-month price target by 8.3% to $5.90, which implies an upside of 17% on the current Webjet share price.

Webjet share price summary

In recent memory, Webjet shares have had a disappointing run but are up 76% in the past 12 months. In 2021 alone, the company’s share price is down 1.38%.

On valuation grounds, Webjet presides a market capitalisation of roughly $1.8 billion with 379 million shares on issue.

Should you invest $1,000 in Webjet right now?

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. 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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