The Webjet Limited (ASX: WEB) share price has been on form this week.
So much so, the online travel agent's shares hit a new 52-week high on Wednesday.
This means the company's shares are now up almost 23% since the start of the year.
Can the Webjet share price keep rising?
According to a note out of Goldman Sachs, its analysts believe that Webjet shares have peaked for the time being.
While impressed with the company's FY 2023 result, which was comfortably ahead of its estimates, the broker has downgraded its shares and taken them off its conviction list on valuation grounds.
Goldman now has a neutral rating and $7.90 price target on its shares. This implies only modest upside for the Webjet share price from current levels.
What did the broker say?
As I mentioned before, Goldman was impressed with Webjet's performance. It also expects more of the same over the medium term, allowing for dividend payments to recommence in FY 2025. It said:
Webjet reported a strong beat in FY23 earnings driven mainly by the Webbeds business. Travel momentum was noted to be broadly strong across key regions with Webjet attaining market share growth in both the B2B and OTA businesses. Cash generation was ahead of expectations, and we expect dividend payout to be resumed in FY25.
However, with the Webjet share price hurtling higher this year, it feels its valuation is now looking full. Goldman adds:
Our Buy thesis on WEB was based on expectations of the Webbeds business offering a strong structural growth opportunity with an improved cost outlook, growth opportunities in the OTA business from increased channel shift towards online, strong cash generation and attractive valuation. We believe that these are now largely priced in as the group continues to deliver on strong results and the market recognizes these opportunities.
While we remain positive on the outlook for WEB with our FY23-26E EBITDA outlook at 23% CAGR, our revised 12m Target Price of A$7.9 offers upside potential of 4% from the current share price and implies 24.5x 12m fwd P/E vs. longer term average of 16.2x. We downgrade our rating on WEB to Neutral and take it off our ANZ Conviction List.
