Why is the Flight Centre share price trailing Webjet lately?

Could broker expectations and differing short interests be behind the companies’ varying performances?

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Key points

  • The Flight Centre share price has fallen 1.6% over the last month while that of Webjet gained 6.7%
  • Flight Centre's higher short interest may factor in their differing performances
  • Broker expectations on the ASX travel shares may also be at play

The Flight Centre Travel Group Ltd (ASX: FLT) share price has struggled over the last 30 days while that of its S&P/ASX 200 Index (ASX: XJO) travel peer Webjet Limited (ASX: WEB) has outperformed.

The Flight Centre share price is currently 1.6% lower than it was this time last month, trading at $20.63.

In that time, stock in Webjet has gained 6.7% to trade at $6.14.

For context, the ASX 200 has traded relatively flat over the last 30 days, gaining just 0.16%.

So, why have the ASX travel shares – which both recently announced their return to profitability – traded in such different directions lately? Let’s take a look.

Is this going wrong for the Flight Centre share price?

There are a few possible reasons behind the differing performances of the Flight Centre share price and that of Webjet.

Firstly, the companies currently have varying short positions.

Flight Centre shares are trading with a 16.2% short position, according to the most recent data available.

That’s fallen by nearly 1% over the last month. However, the dip isn’t nearly enough for the company to shake its title of the ASX’s most shorted share.

Of course, such high short interest means many market participants are effectively betting against the company’s COVID-19 recovery.

Meanwhile, Webjet has a smaller – though, still meaningful – 9.4% short interest.

Thus, more short sellers appear dubious of Flight Centre share price’s future. Could that be due to brokers’ outlook for the respective ASX travel stocks?

What do the experts say?

Back in February, The Motley Fool Australia reported that Goldman Sachs believed Webjet was a better buy than Flight Centre.

The broker saw growth potential in the former’s business to business (B2B) and business to customer (B2C) markets.

And now, an equity analyst from Citi has reportedly expressed similar sentiments.

Citi’s Samuel Seow believes Webjet is the best ASX 200 travel buy while Flight Centre is the worst, The Australian reported.

The analyst is said to like Webjet’s business model and B2B segment. Meanwhile, Flight Centre was reportedly tipped to face headwinds from a slow uptick in Australian international volumes and ‘visiting friends and relatives’ travel.  

Citi reportedly has a $15.55 price target and a ‘sell’ rating on Flight Centres shares. Meanwhile, it’s said to have delivered Webjet’s stock a $6.94 price target and a ‘buy’ rating.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs. 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 Scott Phillips.

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