Why this broker thinks the Webjet share price can fly 26% higher

This could be a travel share to buy…

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Paper aeroplane rising on a graph, symbolising a rising Corporate Travel Management share price.

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Key points

  • Webjet shares have gone nowhere so far in 2022
  • One leading broker believes now could be the time to invest
  • Goldman Sachs is tipping its shares to rise 26% from current levels

After a decent start to the day, the Webjet Limited (ASX: WEB) share price is trading lower this afternoon.

At the time of writing, the online travel agent’s shares are down 0.5% to $5.47.

This means the Webjet share price is trading largely flat in 2022.

Where next for the Webjet share price?

According to the team at Goldman Sachs, its analysts believe the Webjet share price could take off from here.

This morning Goldman retained its buy rating and $6.90 price target on the company’s shares. This implies potential upside of 26% for investors over the next 12 months.

What did the broker say?

Webjet remains the broker’s top pick in the sector. Its analysts prefer the company to rival Flight Centre Travel Group Ltd (ASX: FLT), with the latter getting only a neutral rating and $19.50 price target.

In respect to the travel market, the broker believes that pent up demand will offset inflationary pressures. It commented:

“Despite the inflationary macro environment, we believe the outlook for travel remains relatively protected due to pent-up demand for travel as well as strong consumer health from an economic perspective. Domestically in Australia, our expectations are for consumption to remain robust at c. 6.7% CAGR over FY22-24e on a nominal basis with the lifestyle services category (travel, entertainment etc) expected to see the best growth at c. 10.8% CAGR over the same period.”

But the main reason that Goldman is positive on the Webjet share price is the WebBeds business to business (B2B) business. It explained:

“Webbeds is the 2nd largest Bedbanks operator globally with Hotelbeds, the number 1 player, remaining a strong market leader. Management estimates the addressable market for the Bedbanks business to be at c. A$70bn, representing c. 8.8% of the accommodations market.

At the other end of the COVID crisis, while questions remain about the permanent closure of some individual hotels, we believe that the Bedbanks businesses will remain beneficiaries of the recovery due to their broader distribution ability which is a positive in the constrained demand environment.

Separately, we expect the Webbeds business to be more efficient coming out of the pandemic driven by greater efficiencies from streamlining of platforms and ERP and other initiatives which the group expects to deliver c. 20% increase in cost efficiencies.”

Motley Fool contributor James Mickleboro 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 and 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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