Is the Webjet Limited (ASX: WEB) share price a candidate to take off in 2022?
Well, it already has surged in the last few weeks. Since 27 January 2022, the Webjet share price has jumped 29%.
What is driving the Webjet share price higher?
It was announced on 7 February 2022 that Australia would reopen to all fully vaccinated visa holders, welcoming the return of tourists, business travellers and other visitors from 21 February 2022. That was yesterday.
Visa holders who are not fully vaccinated will still require a valid travel exemption to enter Australia, and will be subject to state and territory quarantine requirements.
Webjet has long said that closed borders cause a significant impact on profit.
A few months ago, Webjet said that demand was already "snapping back" and that there was a rapid return to high booking volumes as borders reopened. WebBeds was profitable since July, whilst the Webjet online travel agency (OTA) returned to profitability in October 2021.
What does the outlook look like?
The ASX travel share is intent on capitalising on the travel recovery. Management believe that its geographic diversification has become a core strength as different regions recover at different times and the market opportunity has increased for all businesses.
WebBeds – the business to business (B2B) segment – was seeing November total transaction value (TTV) tracking at 63% of pre-COVID sales yet many key markets were still to open. It's not the same business as it was pre-COVID, it has expanded its geographic presence in the North American market, added significant domestic inventory globally and signed a range of new customers.
WebBeds is on track to be 20% more cost efficient when at scale, which will come with a targeted earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 62.5%. This could be supportive for the Webjet share price.
Webjet OTA is also "positioned well for growth" with bookings picking up and the opportunity to capture market share.
The Webjet boss John Guscic said:
The opportunities are significant with pent-up demand evident globally as we see travel snapping back as markets open. Our reduced cost base, enhanced technology and strong customer service ethos, in conjunction with a culture of constant product innovation, places us in a powerful position to capture bookings as the recovery continues. Our strong capital base also ensures we can take advantage of strategic opportunities as they arise in a realigned and changing global industry.
For example, it recently announced a US$10 million strategic investment in ROOMDEX, a US-based leader in automated hotel upselling solutions. Webjet has secured a 49% stake with a future option to acquire the remaining 51%. WebBeds plans to offer ROOMDEX products to maximise hotel partners' revenue from every room sold.
Broker opinions on the Webjet share price
Morgans rates Webjet as a buy, with a price target of $6.60. That's a potential double digit upside this year.
Ord Minnett is even more positive on the business, with a buy rating and a price target of $7.31. That's upside of more than 20%.
