Is the Webjet share price an opportunity that can soar?

Are Webjet shares worth considering as the world recovers from COVID-19 impacts?

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Key points

  • Webjet recently reported its FY22 result which showed it returned to profitability in the second half
  • The ASX travel share is seeing the return of more demand
  • Ord Minnett rates the business as a buy, with a price target of $7.48

The Webjet Limited (ASX: WEB) share price has certainly seen a lot of volatility since the onset of the COVID-19 pandemic.

Borders are now opening and travel is returning. Does this mean that the business is an opportunity that could fly higher? Or has the recovery been priced in?

Firstly, let’s have a look at what the company recently said in its result and also its outlook comments.

Webjet FY22 earnings recap

Webjet reported that it was profitable in the second half of FY22, delivering positive cash flow. However, for the year overall, it still made a statutory net loss after tax of $85 million and an underlying net loss of $38.4 million

The company achieved that second-half profitability in WebBeds, thanks to the North American and European markets. Costs were down 31% when compared to pre-COVID levels and it’s on track to be 20% more cost-efficient when back at scale.

The Webjet online travel agency (OTA) business was profitable in FY22 despite COVID-19 impacts, including the Omicron variant.

What about the company’s start to FY23? Webjet said that all of its businesses were profitable in April, with “indications of a further strong uplift in May”. As at May 2022, the ASX travel share said that WebBeds total transaction value (TTV) was ahead of May 2019. Further, Webjet OTA bookings were tracking at around 80% of pre-COVID levels and GoSee TTV was tracking at around 75% of pre-COVID levels.

Reopening and recovery

The size of the recovery could be important for the Webjet share price. Management sees “significant” growth potential in all of its businesses as travel markets reopen.

Webjet said that not only is it seeing strong signs of demand with daily customer search activity but it’s also seeing “demonstrable indicators of confidence in the recovery”. The company says its supply partners are investing in capacity for the future. It pointed to aircraft orders by Qantas Airways Limited (ASX: QAN) and Regional Express Holdings Ltd (ASX: REX) as examples.

The ASX travel share also said that FY23’s first-quarter revenue and earnings before interest, tax, deprecation and amortisation (EBITDA) was also “well ahead” of the fourth quarter of FY22.

For WebBeds, 14 of its top 25 markets are now trading at, or above, pre-COVID booking volumes. Some markets continue to have meaningful restrictions, particularly in the Asia-Pacific region.

Based on the bookings trajectory, Webjet said that it is expecting to be back at pre-COVID booking volumes in the second half of this new financial year (FY23).

Finishing his comments on the outlook for the company, Webjet managing director John Guscic said:

We believe there are significant growth opportunities in all our businesses and are excited for what the future holds.

What do brokers think of the Webjet share price?

Ord Minnett is quite optimistic about the future, with a price target of $7.48, implying a potential upside of more than 20%.

It’s attracted to the recovery of business travel and suggests that Webjet could capture more market share here.

However, Webjet noted that the OTA margins have been impacted due to the loss of ‘overrides’ and commissions payable on international travel.

But Macquarie analysts have a different opinion on the Webjet share price with a price target of $5.80, implying a slight decline. It notes that international travel could continue to suffer, though it could do better in the longer term with cheaper costs at scale.

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