Here’s why I think the Webjet share price could fly higher in 2022

There are plenty of reasons why I think this ASX travel share is a good opportunity.

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Key points

  • After a tough couple of years, the Webjet share price might be ready for take-off
  • Travel demand is coming back, with WebBeds already seeing more volume than pre-COVID times
  • One key positive is that WebBeds is expecting to be 20% more cost-efficient when back at scale

The Webjet Limited (ASX: WEB) share price looks set to take off in 2022 and beyond, in my opinion.

Why? Webjet is one of the biggest ASX travel shares on the ASX, with a market capitalisation of $2 billion, according to the ASX.

Over the last month, Webjet shares have fallen by around 10%. However, after the recent turbulence, I believe that Webjet could go higher from here.

The last two and a half years have been tough for the business, with the company suffering from COVID-19 impacts.

But, with COVID lockdowns fading into history for much of the world, I think the Webjet share price now looks like an opportunity.

Optimism about Webjet

The simple reason why I believe the ASX travel share could be a good shout is due to expectations of growing earnings.

For example, in FY24, numbers on financial service company CMC Markets suggest that the Webjet could generate 30.5 cents of earnings per share (EPS). That would mean the current Webjet share price is valued at 18x FY24’s estimated earnings.

I think Webjet’s earnings can rise because of the return of demand for travel and increasing efficiencies.

Indeed, we heard in mid-May 2022 about the Webjet FY22 result and current conditions.

The ASX travel share said that WebBeds returned to profitability in the FY22 second half, driven by North American and European markets.

The Webjet online travel agency (OTA) business was profitable in FY22, despite border closures and the impact of the COVID-19 variant, Omicron.

Webjet itself said that there were “significant growth opportunities” with all of its businesses as global travel markets reopen.

What about WebBeds?

A key part of my optimism for the business and the Webjet share price is the fact that WebBeds is on track to be 20% more cost-efficient than pre-COVID booking volumes, despite global wage pressures.

It has a significant program underway, with seven automation processes deployed in areas like mapping, cancellations and confirmations. It’s improving conversions and delivering cost savings by automating labour-intensive processes.

Webjet is working on its enterprise resource planning (ERP) unification program, with the first stage going live in the second half of FY22. Efficiencies in core payables and receivable functions are “starting to come through” as volumes increase.

WebBeds is expecting the earnings before interest, tax, depreciation and amortisation (EBITDA) margin to be 62.5% when back at scale.

Outlook looks positive

Webjet said in May that there were “strong signs of demand” with its daily customer search activity. It’s also seeing “demonstrable indicators of confidence” in the recovery from supply partners as they invest in capacity for the future.

For example, ASX airline shares Qantas Airways Limited (ASX: QAN) and Regional Express Holdings Ltd (ASX: REX) have placed orders for more aircraft.

Webjet said that the WebBeds total transaction volume (TTV) for May 2022 was tracking above pre-pandemic levels, with 14 of the top 25 markets now trading at or above pre-pandemic booking volumes.

It has also seen “strong booking momentum” for the Webjet OTA business as international tourism recommences. Total bookings for May were tracking at 80% of pre-pandemic levels. It said that it continues to build its market share, extending its lead as the number one online travel agent in Australia and New Zealand.

With this positive outlook, I think there’s plenty to like about the future for the Webjet share price.

Motley Fool contributor Tristan Harrison 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 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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