Key points
- These two beaten-up ASX shares could be leading opportunities in February 2022 after the recent volatility
- Webjet is expecting to increase profitability as it gets back to pre-COVID scale and captures more market share
- REA Group's profit and cash flow continues to rise. It's seeing higher listing volumes and the company is predicting long-term international growth
The last few weeks have been volatile for the ASX share market. Plenty of stocks have been beaten-up and could be opportunities for investors to consider.
Share prices change all the time. But it's rare for the market to drop this much in such a short amount of time.
Between the start of 2022 to 27 January, the S&P/ASX 200 Index (ASX: XJO) had fallen around 10%. There was a bit of recovery on Friday, but most ASX shares are still far below where they were December 2021.
These two could have a strong future:
Webjet Limited (ASX: WEB)
Webjet describes itself as a digital travel business, spanning both global consumer markets (through 'B2C') and wholesale markets (through 'B2B').
WebBeds is the world's number two player (and fastest-growing) accommodation supplier to the wholesale travel industry.
Webjet is the number one online travel agency (OTA) in Australia and New Zealand. Go-See, previously called Online Republic, is a market leading specialist in providing rental cars and motorhome bookings.
Since the start of the year, the Webjet share price has fallen 13%. In the last three months it has dropped 25% which includes market uncertainty about the impacts of the Omicron COVID-19 variant.
However, the business has plenty of long-term growth plans.
In Webjet's half-year report it said that WebBeds had returned to profitability and it was on track to be 20% more cost efficient at scale. It also said that there is an increased market opportunity due to the B2C channel expansion, targeting previously untapped domestic markets and increasing North America market penetration.
WebBeds is looking to achieve an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 62.5%.
Webjet points out that competition has decreased as financial pressures impact the industry. WebBeds is targeting $10 billion of total transaction value (TTV) and it's aiming to reach 14% of the global B2B TTV.
November 2021 TTV was tracking at 63%, though this was before the spread of the Omicron.
REA Group Limited (ASX: REA)
Since the start of 2022, the REA Group share price has fallen 17%. The real estate digital portal has seen a drop along with many other ASX shares.
However, the business is expecting to report growth in the first half of FY22 with a recovery of national listings.
The first quarter of FY22 showed a 35% increase in revenue after broker commissions to $264 million. There was also a 25% increase in EBITDA to $158 million and a rise of free cash flow of 20% to $49 million. That was despite the lockdowns in Sydney and Melbourne.
October national residential listings were up 16% year on year, with an increase in Melbourne of 20% and 29% in Sydney.
The company has also built a portfolio of assets of international digital property platforms. Some of the markets that it now has exposure to includes India, the US, Hong Kong, China, Malaysia, Singapore, Thailand, Vietnam and Indonesia.
However, the company noted that year on year growth rates are expected to slow as it cycles very strong period listing volumes, particularly in the second half, and regulatory measures to slow price inflation which could impact listing volumes.
