Top broker sees 15% upside in the Webjet (ASX:WEB) share price

Is it time to buy Webjet shares?

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The Webjet Limited (ASX: WEB) share price is out of form and trading lower on Tuesday.

In afternoon trade, the online travel agent’s shares are down 2.5% to $6.09.

Is the weakness in the Webjet share price a buying opportunity?

One leading broker that is likely to see today’s weakness in the Webjet share price as a buying opportunity is Goldman Sachs.

This morning the broker released a note looking at the travel sector and spoke very positively about the company.

According to the release, Goldman has retained its buy rating and lifted its price target on the company’s shares to $7.00.

Based on the current Webjet share price, this implies potential upside of 15% for investors over the next 12 months.

What did the broker say?

Goldman notes that there has been yet another change in the outlook for the Australian travel industry, this time in a positive way.

It commented: “The outlook for travel in Australia has yet again changed significantly since the last update, this time in a positive direction with international reopening officially announced. Internationally, while the outbreak of the Delta variant slowed domestic recovery into September, frequent data updates indicate that recovery has since progressed positively, especially in terms of international travel recovery.”

This has led to the broker maintaining its domestic travel recovery estimates but bringing forward its international travel recovery timeline.

Goldman said: “We maintain our expectations for broader domestic travel recovery in Australia to begin through December and return to pre-Delta wave levels by March 2022, but update our views on International travel recovery from Australia to begin by the end of this year. We now expect pre-COVID travel levels to be achieved in late FY23 rather than FY24 in terms of international travel from Australia in view of the quick rebound seen in other regions.”

“We also bring forward our expectations of regaining pre-COVID international travel levels in Europe and the US to FY23, while we expect Asia to continue to lag,” it added.

What does this mean for Webjet?

Goldman believes the sum of the above will be double digit earnings growth for Webjet between FY 2019 and FY 2024.

It explained: “Our revised earnings outlook implies a 5 year CAGR EBITDA growth of +11.6% over FY19-24e for Webjet, with Webbeds expected to grow at c. 16% CAGR over the same period driven by an improved focus in the Americas region and cost improvements at the other end of recovery.”

Though, the good news for shareholders and the Webjet share price is that there could be upside to these forecasts. This is thanks to Webjet’s strong balance sheet.

Goldman added: “We also believe that the recovery curve has now turned, implying a strengthening cash balance offering WEB the firepower to engage in strategic M&A opportunities where available.”

“Overall, the stock currently trades at a 20.2x full dilution P/E at recovery (FY24), below the peer group multiple at 22.8x,” it concluded.

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

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Motley Fool contributor James Mickleboro 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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