Some of the under pressure ASX travel shares could actually be longer-term opportunities according to the buy ratings of some analysts and brokers.
COVID-19 impacts have hurt demand and travel volumes for nearly two years. But, despite the Omicron variant, these ASX travel shares might be compelling ideas according to some brokers:
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Webjet Limited (ASX: WEB)
Morgans currently rates Webjet as a buy, with a price target of $6.60. That implies that the Webjet share price could rise by around 25% over the next year, if the broker is right.
The broker thinks that Webjet can continue to be profitable for the next result after a promising recent report. However, Morgans still thinks it will take some time before full travel volumes return.
Over the last month the Webjet share price has dropped over 15%.
When Webjet released its FY22 first half result, it said that the business was turning around as global travel markets start to reopen. Webjet said that positive working capital was delivering a $3.5 million cash surplus per month.
WebBeds has been profitable since July, with FY22 first half costs down 31% compared to pre-COVID times and is on track to be 20% more cost efficient at scale. The November 2021 total transaction value was 63% of pre-COVID volumes with many key markets yet to open.
The Webjet online travel agency (OTA) returned to profitability in October, despite the lockdowns and border closures in the second quarter.
This ASX travel share is seeing "rapid returns to high booking volumes as markets reopen". At the time of the report release, third quarter tracking was ahead of the second quarter of FY22.
According to Morgans, the Webjet share price is valued at 35x FY23's estimated earnings.
Corporate Travel Management Ltd (ASX: CTD)
Corporate Travel is rated as a buy by Citi as well, with a price target of $27.11. That suggests a potential increase of the Corporate Travel Management share price of more than 20% over the next year.
This ASX travel share recently announced an acquisition, though the broker was not particularly impressed by the decision to buy the Helloworld Travel Ltd (ASX: HLO) corporate business.
Corporate Travel Management is buying the corporate and entertainment travel business for $175 million.
This deal is expected to add 3% to earnings per share (EPS) on a FY19 pro forma basis, before synergies. Including those synergies, it's expected to add 7% when earnings have recovered. If the deal goes ahead – it requires various approvals including the ACCC – it is expected to happen in the first quarter of 2022.
Despite all of the impacts of COVID-19, including the Omicron variant, Corporate Travel Management was able to generate positive underlying earnings before interest, tax, depreciation and amortisation (EBITDA) in the second quarter of FY22 to the end of November 2021.
It had cash of $102 million and no debt at 30 November 2021.
Citi's numbers put the Corporate Travel Management share price at 21x FY23's estimated earnings.
