When could Webjet (ASX:WEB) earnings return to pre-COVID levels?

How close is the company to getting back on track?

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The Webjet Limited (ASX: WEB) share price will be on watch this Monday morning. This comes following a broader market sell-off on the S&P/ASX 200 Index (ASX: XJO) at the end of last week.

The new Omicron coronavirus variant seems to have spooked investors across global markets.

At Friday’s closing bell, the online travel agent’s shares finished down 5.14% to $5.35 apiece. Its shares have fallen by more than 11% in the past week and could be in for another turbulent day ahead.

How has Webjet been performing?

Before ascertaining when Webjet’s earnings will return to normal levels, we take a look at its latest financials.

Last Wednesday, the company released its first-half results for FY22, highlighting a rebound across the international travel industry.

Webjet reported a cash surplus of $3.5 million per month, a significant turnaround compared to FY21. Severe lockdowns led the company to record an average monthly cash burn of $5.5 million in the previous financial year.

Total transaction volume (TTV) revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) all soared over the 6-month period. TTV stood at 63% of pre-COVID volumes in its WebBeds B2B business, with many travel markets still yet to reopen. On the other hand, revenue came to $55.4 million, more than double the $22.6 million achieved in H1 FY21. EBITDA registered a loss of $38.2 million, an improvement from the $114.4 million loss in the prior corresponding period.

Expenses were also down materially compared to pre-COVID, reflecting strategic initiatives implemented by the company.

Is a full recovery coming for Webjet’s earnings?

Much of Webjet’s earnings are dependent on how the world responds to the new Omicron variant and if lockdowns recommence.

Urgent genomic sequencing is underway to understand exactly how deadly the mutated virus is. It is said to have 30 spike proteins which is double what has been detected in the Delta variant. This means it could easily bypass current defences from existing COVID-19 vaccines.

Pharmaceutical giant Pfizer has signalled that if Omicron is resistant, it can have an updated vaccine ready in 100 days. It expects to have results within 2 weeks to understand if its current mRNA vaccine is effective.

If there is no cause for concern, Webjet’s TTV could reach pre-COVID levels by the second half of FY23. On top of that, its group portfolio will be a much leaner business, having trimmed 20% of operating costs.

Webjet share price summary

In the last 12 months, Webjet shares have gained just 5% following heavy selling by investors last week. Although this can quickly change, depending on the next few days.

Based on valuation grounds, Webjet has a market capitalisation of around $2.03 billion, with approximately 380.51 million shares on issue.

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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 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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