Why is the short interest in Flight Centre (ASX:FLT) shares still growing?

Is this why Flight Centre is the still ASX’s biggest short target?

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Flight Centre Travel Group Ltd (ASX: FLT) shares have continued to hold the title of the most shorted on the ASX this week.

In fact, the short interest in the travel stock has increased.

The most recent data from the Australian Securities and Investments Commission (ASIC) found a whopping 14.6% of Flight Centre shares are in the hands of short sellers.

But with travel bouncing back, why are shorters so bearish on the travel agent’s shares?

Let’s take a look at what might make the stock an attractive short buy.

Why are Flight Centre shares a short target?

 Flight Centre could be an attractive stock to short for several reasons.

Firstly, the uncertainty that the Omicron COVID-19 variant has brought might have led some to think the travel industry could take longer to recover than previously expected.

As The Motley Fool Australia reported last week, travel agents suffered in late November when the emergence of the mutation spurred the government to mandate quarantine for those travelling from 9 affected countries.

Flight Centre CEO Graham Turner reportedly said shutting borders every time a new variant emerged was unsustainable. However, the likelihood of future interruptions to travel seemingly remains rife.

The company’s financial position also might also draw in short sellers.

Regal Funds Management chief investing officer Philip King appeared at the Sohn Hearts & Minds conference early this month. There, he outlined why Flight Centre is his top short pick.

He pointed to capital raises undergone by the company during the pandemic that saw it offering $800 million worth of convertible notes.

That means, if the Flight Centre share price goes up, noteholders might convert their notes. However, doing so would dilute the company’s outstanding securities.

More challenges ahead?

Additionally, some experts are concerned about the company’s business model.

King, alongside Ord Minnett, is worried that it’s potentially less profitable than it used to be.

They believe it could face challenges as airlines encourage customers to book directly instead of paying incentives to travel agents.

Additionally, as Flight Centre closed more than half of its physical stores during the pandemic, King believes it might struggle to bring in revenue in the future.

However, not everyone is bearish on the Flight Centre share price.

Goldman Sachs has placed a $20.40 price target on the company’s stock – insinuating a potential 24% upside.

At the time of writing, Flight Centre shares are 1.5% lower trading at $16.44.

Should you invest $1,000 in Flight Centre right now?

Before you consider Flight Centre, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Flight Centre wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Brooke Cooper 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 Flight Centre Travel Group 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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