Shares in Flight Centre Travel Group Ltd (ASX: FLT) have come in as the market's most shorted every week of 2022 so far.
As of The Motley Fool Australia's latest weekly shorting breakdown, the S&P/ASX 200 Index (ASX: XJO) travel giant had a short position of 14.6%. That's around 10% higher than it was prior to the pandemic.
Meanwhile, the Flight Centre share price has dumped 20% since the start of the year to trade at $14.88 at Wednesday's close. Comparatively, the ASX 200 has fallen 12% so far this year.
So, with that tumble under its belt, why are short-sellers seemingly expecting the travel agent's stock to continue falling? Let's take a look.
Image source: Getty Images
What attracts short-sellers to Flight Centre shares?
Flight Centre shares have been a magnet for short-sellers this year, with its short position peaking at a whopping 18.5% in April.
And the company's latest earnings release might have the answer. The company didn't provide financial year 2023 guidance when it dropped its full-year results in August.
Instead, it said a lack of capacity is impacting airfare pricing while cancellations, delays, and high demand are fuelling a "renaissance of the expert travel advisor".
Meanwhile, Morgans senior analyst Belinda Moore said such reduced capacity sees Flight Centre with less bargaining power with airlines.
Additionally, Moore said "cyclical factors", such as high airfares, business mix changes, and lower commissions, will weigh on the company's margins in the near term.
Morgans has a hold rating on Flight Centre shares, dropping its price target to $18.25 following the company's earnings, my Fool colleague James reports.
And there are more reasons investors might be sceptical of the stock's future.
Monash Investors director and co-founder Simon Shields appears bearish. Monash is among those shorting Flight Centre shares, the fundie said, courtesy of Livewire.
Shields noted the fund's shorting of the stock comes down to "structural reasons".
While the travel industry is recovering, Flight Centre is struggling against lower commissions from airlines and inflationary pressures on its brick-and-mortar retail model, the fundie said.
However, not all are so doubtful. Goldman Sachs has tipped the stock to rise to $19.60. Though, the top broker hasn't gone so far as to recommend Flight Centre as a buy, instead maintaining its neutral rating.
