Could now be a good time to buy Webjet shares?

Travel is making a comeback, but what does this mean for Webjet shares? Let's take a look…

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Key points

  • Webjet shares are in the limelight again, with travel returning to full swing
  • Analyst sentiment is mixed on the share, however, support is there
  • The online travel agent's shares are down almost 18% in the past 12 months of trade

Shares of Webjet Limited (ASX: WEB) are in focus on Thursday, as travel heats back up and Aussies begin planning trips abroad once more.

A record number of Australians have applied for passports in 2022 as airlines deal with the built-up demand from two years of border closures due to COVID-19.

Webjet has come in for a soft landing these past 12 months with a series of lows across the year, finally bottoming at a year-to-date low of $4.64 on 3 October.

At the time of writing, the Webjet share price is up 0.2% to $5.19.

But how does the future look for this ASX travel share?

Can Webjet shares take off again?

It's no secret the travel and tourism industries were among the hardest hit by the COVID-19 pandemic. Despite this, numbers are tracking back up again — and this could spell good news for Webjet shares.

Data compiled by the International Air Transport Association (IATA) predicts that four billion trips will take place in 2024. That's a 103% increase on the 2019 [pre-COVID] total. Last year saw traveller numbers at just 47% of the 2019 highs.

Airlines are also forecasting strong travel numbers, with a return to full travel regimes planned within the next year or so, pending no other upsets.

For all those along the travel and tourism industry value chain – from agent to airline – this could spell a return to growth.

Looking ahead, however, the runway is different for Webjet compared to its previous three years of operation.

Whereas the pandemic era bought on a period of liquidity, low interest rates and government support, the near-term future looks a little different.

Many experts are talking in terms of inflation, interest rates and recession. This means different things for companies than it does for everyday consumers.

For companies, expenditure will be pulled into the limelight, with capital-light companies – those with lower capital expenditures (CapEx) – looking attractive for that reason.

What do the experts think?

Webjet recorded CapEx of $11.8 million in its most recent set of results. That's down from $15 million in 2019. Coupled with its cash generation, brokers are constructive on Webjet shares.

Goldman Sachs rates it a buy with a $6.50 price target and reiterates this point. It notes Webjet has "demonstrated strong cash generation as the market recovers and valuation continues to be impacted by macro concerns".

Meanwhile, those at Morgans are equally positive on the shares. The analyst team points to a strong European summer season and points out "crisis and cost reduction initiatives will reduce its cost base by 20% across the group" once implemented.

Both brokers join six other firms in rating Webjet shares a buy. Four say it's a hold, with two brokers recommending to sell, according to Refinitiv Eikon data.

The consensus price target from this list is $6.40, suggesting a portion of upside should the number be correct.

In the meantime, Webjet shares are down almost 18% in the past 12 months of trade.

Motley Fool contributor Zach Bristow 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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