The Webjet Limited (ASX: WEB) share price is falling on Thursday.
In afternoon trade, the online travel agent's shares are down 3% to $5.61.
Why is the Webjet share price falling?
As well as being dragged lower by a broad market selloff, the release of a softer than expected full-year result appears to be weighing on the Webjet share price.
According to the release, Webjet reported a 261% increase in total transaction value (TTV) to $1,638 million, a 258% jump in revenue to $138 million, and an EBITDA loss of $15 million.
As a comparison, analysts at Goldman Sachs were expecting the company to deliver revenue of $143.6 million and positive EBITDA of $1.5 million.
Goldman commented:
WEB reported FY22 results below GSe driven by lower than expected activity levels in the Bedbanks business. However, we note that 2H22 is a seasonally weaker half for the Bedbanks business and view the return to above pre-COVID level activities for this segment in May 2022 as encouraging progress for the business.
Were there any positives?
Fortunately, it wasn't all bad news. For example, the company's operating cash flow came in at $71.5 million. This was well ahead of Goldman's estimate of $43.4 million, which itself was significantly higher than consensus estimates for a negative operating cash flow of $28.3 million.
This is a big positive according to Goldman due to cash now being a key focus for the market.
In addition, the broker highlights that Webjet's key WebBeds business was trading at above pre-COVID levels in May. Furthermore, it notes that management stated that it expects to see strong growth in the North American business even beyond current levels, which were 204% and 349% above pre-pandemic levels in USA and Canada, respectively.
The broker explained:
While the group reported an EBITDA miss vs. GSe and Consensus, we believe the cash results and early indications into FY23 remain very strong. While no outlook has been provided in terms of FY23 profitability, the 20% cost reduction guidance has been maintained. Overall, we view the results as a positive in terms of the 2 key factors we were watching for, namely, cash results and longer term outlook in the Bedbanks business.
Goldman Sachs currently has a buy rating and $6.90 price target on its shares. Based on the current Webjet share price, this implies potential upside of 23%.
Though, it is worth remembering that this rating and price target could change in the coming days once the broker has updated its financial model.
