'Lends itself to rapid growth': Could Webjet shares be set to soar?

This expert has revealed why Webjet is an opportunity.

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Webjet Limited (ASX: WEB) shares could be set to fly again according to the experts at E&P Capital.

The ASX travel share has been on a steady journey of recovery since the huge COVID-19 disruption in 2020, bringing lockdowns and border closures.

There has been a large bounce back in travel demand, as lockdowns ended and borders reopened.

Now, E&P Capital has suggested there could be another "leg to the rally" for ASX travel companies, including Webjet shares.

Bullish outlook

According to reporting by The Australian, E&P said:

While the cyclical rebound from Covid is largely captured in expectations for FY24, we believe there is another leg to the rally. For those wanting to pick only one, we have ranked the companies according to valuation, earnings predictability, management access, long term growth potential, earnings quality and capital structure.

E&P said Flight Centre Travel Group Ltd (ASX: FLT) could be the best option, but that there were also a number of reasons to like Webjet shares.

The experts at E&P said Webjet's business-to-business segment called WebBeds is the strongest driver of revenue. It's reportedly third in the $80 billion global distribution market behind Expedia and Hotelbeds, which have market shares of 45% and 16%, respectively.

Why does WebBeds have such a strong growth outlook? According to E&P:

…its marketplace model lends itself to rapid growth from consolidating the $28 billion still up for grabs.

We believe WebBeds is signalling plans to cut prices and chase volume (mainly in the US). Given the same room can be sold by multiple players, lowest price generally wins. Backed up by increased investment in artificial intelligence (to improve speed and conversion rates), WebBeds is well placed to win considerable share from the smaller players who lack the financial capacity and scale.

A director sees Webjet shares as an opportunity

Interestingly, it was announced today that Webjet director Brad Holman has bought another 10,936 Webjet shares, taking his total ownership (direct and indirect) to a total of 108,176 shares.

The on-market trade for 10,936 shares came at a cost of $74,911.60, which comes out at an average cost of $6.85. So, investors can currently buy at a similar price as the director recently invested.

The company's shares are currently trading for $6.71 apiece shortly after market open on Wednesday.

Webjet share price valuation snapshot

The Webjet share price has fallen more than 10% since the end of July 2023, which has made its valuation more appealing.

According to Commsec, the company is trading at 22 times FY24's estimated earnings and 18 times FY25's estimated earnings.

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 Flight Centre Travel Group. 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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