Why have investors been saying goodbye to Helloworld (ASX:HLO) shares lately?

Investors are wary of the uncertainty surrounding travel…

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A sad traveller sitting in a car waves goodbye

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Shares in Helloworld Travel Ltd (ASX: HLO) have been struggling over the past month.

Investors have been dumping the travel management company as concerns of further COVID-19 ramifications spread. In turn, the Helloworld share price has tumbled 22% in the last month.

Like many other ASX-listed travel-exposed companies, Helloworld’s operations remain heavily impacted by travel restrictions. Unfortunately, the latest Omicron concerns have only added to the bleak operating environment for such businesses.

What’s the travel situation?

Many countries have gone back into a defensive approach in response to the new COVID-19 development. The new variant comes at a time when the Northern hemisphere had already been experiencing a substantial increase in case numbers as it enters the colder season.

The situation for Helloworld shares isn’t ideal as governments reintroduce added restrictions. For Australia, the government has imposed new border security measures effectively immediately. These include:

  • Anyone who is not a citizen or permanent resident of Australia who has been in African countries where the Omicron variant has been detected — within the past 14 days — will not be able to enter Australia.
  • Australia citizens and permanent residents arriving from the affected countries will need to go into supervised quarantine for 14 days.
  • Anyone who has arrived from the affected countries in the past 14 days will need to self-isolate and receive a COVID-19 test.
  • All flights from the 9 southern African countries will be suspended for 14 days, beginning 27 November 2021.

With a new variant on the loose, demand for travel has likely taken a blow. Currently, there are 6 confirmed cases of Omicron in Australia. The latest confirmed case is a fully vaccinated person who had arrived back from southern Africa.

Furthermore, the latest variant puts uncertainty on when travel companies might resume ‘normal’ operations. The question is an important one as Helloworld burns through its cash. In FY21, Helloworld shares came under pressure as it posted a $35.5 million net loss.

The company reported a cash balance of $131 million at the end of June 2021.

Helloworld shares in review

The S&P/ASX 200 Index (ASX: XJO) has made for a better investment so far this year. Exposure to industries less impacted by COVID-19 has allowed the benchmark index to gain 8.3%. In contrast, Helloworld shares have shaved off 15.4% since the beginning of the year.

Lastly, Helloworld’s market capitalisation has yet to recover to its pre-pandemic level. The company was previously worth around $630 million prior to the 2020 market crash. However, restrictions took a toll on Helloworld. As a result, the company is now valued at approximately $330 million.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Helloworld Limited. The Motley Fool Australia owns shares of and has recommended Helloworld Limited. 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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