The Webjet Limited (ASX: WEB) share price is in the red in December 2021 so far.
Despite COVID-19 being a global issue for almost two years, it continues to feature heavily in investor thoughts about ASX travel shares.
Not only is the Webjet share price in the red this month to date, but it has dropped 18% since 8 November 2021.
Recent improvements for Webjet
One of the biggest difficulties for ASX travel shares over the last couple of years is that travellers have been blocked from travelling either regionally or even internationally. In the last few months, restrictions were finally easing.
Australia’s international borders were starting to open up, as was international travel between places like Europe and the US.
It was only a couple of weeks ago that Webjet released its FY22 first half result.
With that report, Webjet said that the business was turning around as global travel markets reopened, with positive working capital delivering $3.5 million per month of cash surplus.
Webjet revealed that WebBeds had been profitable since July, with costs down 31% compared to before COVID-19 times and on track to be 20% more cost efficient at scale. The Webjet online travel agency (OTA) business returned to profitability in October 2021.
The ASX travel share said that FY22 third quarter trading was ahead of the FY22 second quarter. November 2021 total transaction value (TTV) was 63% of pre-COVID volumes with many “key markets” yet to open.
Webjet said that based on its current trajectory, it said it was expecting to be back at pre-COVID booking volumes by the end of the second half of FY23, being October 2022 to March 2023.
Omicron-shaped spanner in the works?
A new COVID-19 variant called Omicron may be impacting investor thoughts about the Webjet share price.
The BBC has reported that the World Health Organization’s regional director for the western Pacific, Dr Takeshi Kasai, said the geographic distribution of the new Omicron variant is “likely already wider than currently reported”. The WHO also said that all countries must prepare for potential new surges from Omicron.
Certain travel rules are coming back. For example, from next week, all international arrivals into the USA must get a COVID test in the 24 hours before they depart.
There has been difficulties for other ASX travel shares in recent weeks.
Since 9 November 2021, the Corporate Travel Management Ltd (ASX: CTD) share price has fallen more than 12%, the Flight Centre Travel Group Ltd (ASX: FLT) share price has declined over 17% and the Qantas Airways Limited (ASX: QAN) share price has dropped 15%.
Time will tell how dangerous the Omicron variant is and how effective vaccines are against it.
Is the Webjet share price good value?
Morgans thinks so, with a buy rating and price target of $6.60 – this suggests a potential upside of more than 20% if the broker is right.
Citi has a pretty similar price target of $6.46, though the current rating is only ‘neutral’. The broker is expecting a return to profitability for Webjet in FY23, with its numbers suggesting that the Webjet share price is valued at 30x FY23’s estimated earnings.