Flight Centre Travel Group Ltd (ASX: FLT) shares are having a tough time on Thursday.
At the time of writing, the travel agent giant's shares are down 3% to $18.75.
This means they are now down 15% over the last two months.
Why are Flight Centre shares falling?
Today's decline has been driven by broad market weakness, whereas its decline over the last couple of months has been caused by concerns over normalising travel growth.
But while this pullback may be disappointing for shareholders, it could be a buying opportunity for the rest of us.
That's the view of analysts at Morgans, which see major upside potential for Flight Centre shares from current levels.
According to a recent note, the broker has put an add rating and $26 price target on its shares.
This would mean a return of almost 40% for investors if Morgans is on the money with its recommendation.
Why is it bullish?
Morgans was pleased with the company's performance in FY 2023 and believes more of the same is coming this year. Particularly given its new business model, which is far more efficient and profitable than its pre-COVID model. It said:
FLT's FY23 result was in line with its recent upgrade. The 2H Leisure result was the highlight. The material improvement in its 2H23 NPBT margin demonstrates its more efficient and profitable new business model. The final dividend was a nice surprise reflecting the recovery underway and FLT's stronger balance sheet. Outlook comments were positive but expect earnings guidance at the AGM in November.
Morgans also highlights that there's potential for Flight Centre to smash consensus expectations if it delivers on its margin targets. This could bode well for its shares in the future. It adds:
Given we forecast a strong recovery over coming years, we have made only minor changes to our forecasts. However we note that there is substantial upside to consensus estimates if FLT achieves its 2% margin target in FY25. With confidence that the travel recovery has much further to go and the benefits of FLT's transformed business model emerging, we think the company is well placed over coming years. We maintain an Add recommendation.
