The Webjet Limited (ASX: WEB) share price could be one to watch for the rest of this year. Could the ASX travel share rise to $7 by the end of 2021?
One broker has a positive price target for the company.
Image source: Getty Images
UBS rates Webjet as a buy
Webjet is rated as a buy by the broker UBS, with a price target of $6.85. That suggests the broker believes Webjet shares can rise by not far off 10%. However, a price target is for a period of 12 months, not just for the next quarter. It may take a bit longer than December 2021 to get to $7.
Increasing vaccine coverage is helping increase UBS' belief in the company's prospects. It noted that the ASX travel share was doing well when there weren't so many COVID restrictions. Once borders open again, the broker is positive on Webjet's future, with a lot of expected demand waiting to be unleashed.
What has the ASX travel share said?
Webjet said in an update the WebBeds business was profitable in July and August and is well on track to be profitable in September. It has seen "strong demand" as travel restrictions ease in North America and Europe, suggesting "significant upside" as more international markets reopen.
The company's online travel agency business was profitable for the period from April to July, though the lockdowns in Australia and New Zealand impacted that. Online Republic was also profitable in April and May, but was also impacted by the lockdowns. Management said the company is confident that both businesses will return to profitability as soon as the Australian and New Zealand markets reopen.
The Webjet share price could be in focus when borders do open.
Management also said:
We see a world of opportunity for Webjet. All our businesses have significant potential to grow market share by expanding into new market segments and benefiting from consumers shifting to buy travel online. Transformation initiatives are underway and we are on track to reducing costs by at least 20% once the company gets back to scale. As a result, as conditions normalise, we believe our Webjet businesses will have higher market share, lower costs and greater profitability.
While the exact timing is uncertain as our growth opportunities are driven by the opening of borders, we know demand for travel will return and we are absolutely ready to capture it.
What is the UBS valuation on the Webjet share price?
The broker thinks that Webjet is going to get back to making profit in FY23.
Based on the UBS earnings estimate for the 2023 financial year, Webjet shares are valued at 20x FY23's projected profit.
UBS has also pencilled in that Webjet could pay a dividend in FY23. How much? Not a big one, the estimate is 12.7 cents per share. Excluding franking credits, that translates to a dividend yield of 2%.
