The Webjet Limited (ASX: WEB) share price is an investment to consider as travel demand returns to the market.
It has been a difficult period for Webjet since the onset of the COVID-19 pandemic. The Webjet share price is still down around 40% compared to the pre-COVID crash, though there are a significant amount of more shares on issue now after the capital raising.
Travel demand returns
Webjet is due to hand in its FY22 result on 19 May 2022. However, investors may have gotten an insight into travel demand from a recent update from Qantas Airways Limited (ASX: QAN).
The airline said that domestic travel has returned to pre-COVID levels ahead of expectations. Qantas also said that there is "strong demand" for international travel, though some key markets are yet to open.
Qantas said that leisure demand is "very strong". Qantas and Jetstar both were operating at approximately 110% of pre-COVID capacity over the Easter school holidays. It also said that the rebound in travel for business purposes was "above expectations". Small business travel was above pre-COVID levels and corporate travel was 85% of pre-COVID travel.
The airline also noted that the removal of Australia's pre-flight testing requirement and early opening of New Zealand's borders provided tailwinds during April.
Does this make the Webjet share price a buy?
Webjet and Qantas are not the same business. Demand for one business may not equally translate into the same demand growth for the other business, Webjet may be seeing less (or more) demand than Qantas over the same period.
However, Webjet investors may think that it's useful to know about the conditions that Qantas is seeing.
One of the most recent broker ratings on Webjet came from Citi. It currently rates Webjet as a buy, with a price target of $6.50. The operating leverage that Webjet has with its business model will help profitability as volume returns.
The broker is expecting that Webjet can grow its market share, particularly as more people purchase their travel through online means.
According to Citi, the Webjet share price is valued at 33 times FY23's estimated earnings, implying profit will return in FY23.
Ord Minnett has one of the most positive price targets, with a target of $7.51. That's a potential upside of almost 30%.
Webjet's latest commentary
Half a year ago, Webjet said that its WebBeds business had been profitable since July 2021, while the Webjet online travel agency (OTA) business returned to profitability in October 2021.
Webjet said that it has expanded its geographic presence in the "key" North American market, added significant domestic inventory globally, and signed a range of new domestic and OTA customers, "resulting in a materially larger opportunity for growth than was targeted pre-COVID."
Webjet also said that it sees an opportunity to increase market share in the OTA business as consumers continue to shift to buying online and believes the innovations offered by 'Trip Ninja' technology will play a key role in growing its share of the international flights market.
Webjet said that WebBeds is on track to be 20% more cost-efficient at scale.
Webjet share price snapshot
Since the start of 2022, the Webjet share price has climbed almost 10%.
