The Webjet Limited (ASX: WEB) share price is pushing lower today and is now trading 4.1% in the red at $4.76.
Webjet booked a trip down south earlier in the year and, after some sideways action, has begun to come in with a hard landing to today's market price.
The evolution of the Webjet share price for the past 12 months is seen in the chart below.
Image source: Getty Images
Is Webjet a buy?
The travel and tourism industry has been one of the worst hit by COVID-19 lockdowns. However, it's made somewhat of a comeback in 2022.
According to The International Air Transport Association (IATA), travellers are expected to embark on a mammoth four billion trips in 2024 – more than 103% of the 2019 [pre-COVID] total.
This is a stark difference from last year's numbers. In 2021, overall traveller numbers were just 47% of the 2019 highs.
Buying Webjet shares lends investors unique exposure to the travel and tourism segments, albeit with a completely different business model.
Being in the services industry, and using software to generate revenue, means capital expenditure (CapEx) is light for Webjet.
CapEx is the amount of funds required to grow and maintain its physical/fixed assets, like land and buildings. In its last half-year results, Webjet reported capital expenditure of $11.8 million, with $15 million in FY19.
Airlines, on the other hand – another route to gain travel exposure – have enormous capital expenditure just to stay afloat.
Over the same half-year period, CapEx for Qantas Airways Limited (ASX: QAN) was $581 million, down from a high of $1.2 billion in FY19 (expect numbers to return to 2019 levels).
Hence, even though total debt levels have crept up for Webjet since FY19, only 21% of assets are funded by debt, and the percentage of debt to equity on the balance sheet is evenly split.
Investors also received 18 cents per share in trailing dividends this year with a trailing dividend yield of 1.4%.
What do the brokers say?
Brokers certainly believe Webjet is a buy too. According to Refinitiv Eikon data, 10 out of 16 analysts urge clients to buy Webjet right now, with four saying it's a hold.
The consensus price target from this list is $5.97, suggesting around 25% return potential from the current Webjet share price.
With low fixed expenses and the potential to benefit from a rebound in recovery, the bullish case is clear for brokers to recommend Webjet as a buy.
The risk that numbers won't return to previous highs remains a very real one, however. Nevertheless, the Webjet share price is down 24% over the past 12 months.
