Christmas is a bumper time for travel, so why is the Webjet (ASX:WEB) share price still struggling in December?

Webjet shares have struggled this month.

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The Webjet Limited (ASX: WEB) share price has gone down 5% in December. In the last month it has actually dropped by 8%.

This is despite the business reporting a bumpy but ongoing recovery from the worst of the COVID-19 impacts.

What’s going on with the Webjet share price?

It’s hard to know exactly why some investors are deciding to sell at lower prices than they were before.

It may or may not be a coincidence that the Omicron variant of COVID-19 has risen to prominence around the world over the last month after South Africa reported the new variant to the World Health Organisation on 24 November 2021. As mentioned, Webjet shares have declined 8% since that time.

Some countries have been re-introducing restrictions in winter in the northern hemisphere, particularly in Europe.

Some countries like Germany, Portugal and Finland have scheduled restrictions to come in around Christmas, forcing venues like bars and nightclubs to shut. Spain is making it mandatory to wear a face mask outside again.

However, that’s not the only thing that investors may be thinking about over the last month. Webjet also reported its FY22 half-year result to investors a month ago.

Webjet HY22 result

At the time, Webjet said that its business was turning around as global travel markets started to reopen.

WebBeds had been profitable since July, with costs down 31% compared to pre-COVID and on track to be 20% more cost efficient at scale. November 2021 total transaction value (TTV) was 63% of pre-COVID volumes despite many ‘key markets’ not yet being open.

The Webjet online travel agency (OTA) business returned to profitability in October 2021. It was profitable in the first quarter, but the lockdowns and border closures impacted that.

It was seeing a rapid return to high booking volumes as markets reopened in the third quarter, which was tracking ahead of the second quarter.

The board was feeling reassured enough by market conditions to reveal that the deferred FY20 interim dividend of $0.09 per share was going to be paid on 23 December 2021.

However, despite the progress, the six months to September 2021 showed a reported net loss after tax of $61.8 million and an underlying loss of $43.8 million. That compares to an underlying loss of $58.5 million in the six months to December 2020. The bottom line can have a significant impact on investor thoughts on the Webjet share price.

Management said that the opportunities are “significant” with pent up demand evident globally.

The company thought the ongoing vaccinations, boosters and anti-viral treatments would stabilise the impact of COVID within the next six to twelve months. Webjet also said it would be back at pre-COVID volumes by the second half of FY23, which was October 2022 to March 2023.

But those comments were before the huge rise of Omicron cases, so time will tell how much impact that has on those expectations.

Expert thoughts on the Webjet share price

The broker UBS thinks that Webjet is a buy, with a price target of $6.85, suggesting potential upside of more than 30% over the next year. It thinks that the ASX travel share can do well over the coming years as demand returns and operating leverage comes into play.

It thinks that Webjet can display a good recovery beyond FY23 if it is able to hold onto (or even grow) its market share.

On UBS’ numbers, the Webjet share price is valued at 17x FY23’s estimated earnings.

Motley Fool contributor Tristan Harrison 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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