Holidays on hold: How will this affect ASX travel shares?

A new survey shows many Australians are delaying holidays due to cost-of-living pressures.

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New research by Finder shows 37% of Aussies have put holidays on hold due to rising cost-of-living pressures. Could this affect ASX travel shares?

Here, I'll examine the latest broker ratings, share price targets and commentary on three of the most popular ASX travel shares.

Qantas Airways Limited (ASX: QAN)

Goldman Sachs has a buy rating on Qantas with a 12-month share price target of $8.05.

The ASX airline share closed at $6.07 on Tuesday, down 0.82% for the day and down 5.45% over 12 months.

Goldman analysts Niraj Shah and Joseph Kusia expect the airline's traffic capacity to return to 95% of pre-COVID levels by FY24. They also expect its earnings capacity to exceed pre-COVID levels by about 52%.

The analysts said the ASX travel share was undervalued at today's price level, commenting:

QAN's current market capitalisation and enterprise value are 10% below and 11% below pre-COVID levels. As such, we believe QAN is not priced for a generic recovery, let alone prospects for improved earnings capacity.

We continue to see upside associated with substantially improved MT earnings capacity. 

Flight Centre Travel Group Ltd (ASX: FLT)

Goldman has a sell rating on Flight Centre with a 12-month share price target of $18.30.

Flight Centre shares closed at $19.40 on Tuesday, down 2.02% for the day and down 8.4% over 12 months.

Goldman analysts Lisa Deng and James Leigh said:

FLT provided its trading update for 3Q24 and reiterated group underlying PBT guidance of A$300-340mn for FY24 (A$270 – A$310mn excluding Convertible Note amortisation).

While our calculation of implied 3Q24 numbers suggests that there is slightly below-expectations run-rate in Corporate, this will likely be offset by above-expectations run-rate in Leisure.

Net net, we continue to see recovery and competitive risks in Corporate per our downgrade in March 2024 and our thesis remains unchanged.

The team at Morgans has a different view to Goldman Sachs on this ASX travel share. They have an add rating on Flight Centre shares with a 12-month price target of $27.27.

Morgans said Flight Centre has the greatest risk/reward profile of the ASX travel shares under its coverage.

The broker explained:

The risk is centred around execution given its changed business model, while the reward is material if FLT delivers on its 2% margin target. If achieved, this would result in material upside to consensus estimates and valuations. FLT is targeting to achieve this margin in FY25.

With greater confidence in the travel recovery and the benefits of Flight Centre's transformed business model already emerging, we think the company is well placed over coming years.

Webjet Ltd (ASX: WEB)

Morgans has an add rating on Webjet shares with a 12-month price target of $10.33.

The ASX travel share finished the session yesterday at $8.65, down 1.48% for the day and up 15.95% over 12 months.

Morgans said the online travel booking company has "significant market share still up for grabs" within its WebBeds B2B business and is well positioned for the future.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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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