What might the WA border closure mean for the Webjet (ASX:WEB) share price?

The company’s shares have taken a beating this week.

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Key points

  • Webjet shares down 12% over the week due to market fears and WA border closure
  • COVID-19 cases at the highest since the middle of the month
  • Increased focus on North American B2B market

The Webjet Limited (ASX: WEB) share price has continued its rapid descent following a broader market sell-off in January.

The online travel agent’s shares tumbled again yesterday, this time by 2.95% to $4.61 apiece. This means its shares have lost almost 12% since this time last week, reflecting an 8-month low.

In comparison, the S&P/ASX 200 Index (ASX: XJO) gave up 1.77% to 6,838.3 points on Thursday. The benchmark index shed 6.8% for the week to slump to a 9-month low.

Stock markets around the world have plummeted following concerns of military tension between Russia and Ukraine. In addition, potential interest rate rises and the spread of Omicron have fuelled investors’ worries.

What’s ahead for Webjet shares?

A rise in COVID-19 cases across Australia has led the Western Australian government to postpone the reopening of its borders. This has not only led domestic passengers to delay or cancel holiday plans but also has affected international tourists.

The latest figures show Australia recorded 97,890 COVID-19 cases yesterday, the highest since 15 January.

Double vaccinated interstate and international travellers would have been able to enter Western Australia without quarantine from 5 February. However, the border will now remain closed indefinitely.

Investors appear to have chosen to dump Webjet shares price in light of the multitude of factors impacting the markets.

While Western Australia remains shut, investors will be wondering what this means for the Webjet share price.

In its FY22 first-half results last November, the company noted that its WebBeds business is poised to deliver significant revenue growth.

In particular, management has focused on expanding its domestic offering, with increased penetration into the North American B2B market. This segment is the company’s second biggest market behind the Asia Pacific region in terms of booking numbers.

Even with Western Australia closed for now, Webjet will be churning profit due to its geographical spread. The state does play an important role but is not vital in terms of the company’s operations.

A retained global footprint, hotel supply relationships, and global customer network could boost the company’s revenue.

Total revenue in H1 FY22 stood at $55.4 million, a 145% increase when compared to the prior corresponding period.

Looking ahead, Webjet is scheduled to report its FY22 results towards the backend of May 2022.

Webjet share price recap

It’s been a rollercoaster 12 months for Webjet investors, with its shares down 5% over the period.

The Webjet share price reached a 52-week high of $6.89 in early October when Australia appeared to have managed the pandemic. However, since the outbreak of the Omicron variant, its shares have nosedived to May 2021 levels.

On valuation grounds, Webjet presides a market capitalisation of roughly $1.75 billion, with approximately 380.51 million shares outstanding.

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Motley Fool contributor Aaron Teboneras 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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