Can Flight Centre shares reach $20 by Christmas?

We check the ASX travel share's prospects in gaining altitude.

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The Flight Centre Travel Group Ltd (ASX: FLT) share price has had a strong year. It has gained 32% in 2023 to date, as we can see on the chart below.

But can the ASX travel share reach $20 before Christmas? It's currently sitting at $19.01 a share.

As we can see on the chart, the company is actually down around 20% since July 2023.

Let's keep in mind that investors shouldn't focus too much on a short-term timeframe like one month. It's the long term that is most important. For starters, let's remind ourselves how the company has been performing recently.

Recent performance

At its annual general meeting (AGM) earlier this month, Flight Centre said it has seen further total transaction value (TTV) growth, representing the second-strongest start to a year in its history.

It also said there has been continued margin improvement, delivering "strong 1Q profit uplift", and there are "better market dynamics" with some "positive signs emerging for travellers".

In the first quarter, it has seen $6 billion in TTV, an increase of around 20% year over year. Revenue has gone up by 38%. The underlying cost margin (excluding touring cost of sales) has been fairly flat, "paving the way for strong profit and profit margin growth".

The ASX travel share has seen an improvement of more than 500% in underlying profit before tax (PBT) to $54 million, at a 0.9% underlying profit margin. Profit is, of course, usually a key driver for the Flight Centre share price.

The company also said almost 40% of incremental revenue growth has been converted to underlying earnings before interest, tax, depreciation and amortisation (EBITDA), with the leisure margin at 47% and the corporate margin at 45%.

Flight Centre said proactive capital management initiatives highlight confidence in both Flight Centre's current position and future prospects.

The company reported there's a positive industry outlook, with 3.4% projected growth in passengers to 2040.

It expects a full industry recovery in the 2024 calendar year and passenger numbers are expected to double by 2040.

Outlook

Flight Centre said it's currently expecting a full-year underlying PBT between $270 million to $310 million. The mid-point of that guidance is "broadly in line" with what the market (consensus) is expecting and represents growth of 175% on FY23.

The ASX travel share is expecting more of its profit to come in the second half of FY23, in line with normal seasonality and the additional impact from its acquisition of luxury travel brand Scott Dunn.

It said lack of airline competition and capacity is an "ongoing impediment to full recovery but gradually improving".

Broker view on the Flight Centre share price

The broker UBS is neutral on Flight Centre, with a price target of $23.45. This implies a possible rise of 23% over the next 12 months, though not necessarily in the next month.

However, by next Christmas, the company could have reached that level if UBS's forecast is accurate, but a price target is certainly not a guarantee.

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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