Are Webjet shares a buy following the demerger?

The move created two separate entities.

| More on:
Man sitting in a plane seat works on his laptop.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Webjet Ltd (ASX: WEB) shares are in the green today and are currently swapping hands at $7.21 apiece after the company underwent a major transformation last week.

It starts with the demerger of its consumer and business-to-consumer (B2C) operations, creating a new listed company, Webjet Group Ltd (ASX: WJL). It began trading on the ASX this week.

Webjet Group shares currently fetch 99.5 cents apiece, up more than 24% since the initial listing.

With the company looking to unlock value for its shareholders, investors are wondering whether Webjet shares are still worth considering. Let's see what the experts think.

Are Webjet shares a buy?

Webjet shares fell sharply following the demerger, continuing a longer-term downtrend.

As a reminder, the existing consumer business – to be renamed WEB Travel on October 2 – will focus entirely on the B2B travel arm, WebBeds. It's ticker will remain "WEB".

Whereas the new company – Webjet Group Limited – looks after the consumer products end of the group with brands like GoSee and Trip Ninja. The ticker is "WJL".

Even though the reaction was swift, the declines aren't necessarily negative for the company's shareholders.

Webjet shareholders received 1 share in the newly listed entity for every Webjet share they owned, in a 1-for-1 ratio. So the drop in Webjet's share price is offset by the value created by the newly listed Webjet Group.

Analysts believe the move enhances the potential for even more capital growth.

According to RBC Capital Markets, Webjet shares could be well poised to grow. The broker identified the company as an "attractive pure-play" travel distribution business following the demerger.

RBC notes the company is targeting a compounding growth rate of approximately 17% until FY30 – far outpacing the market's projected growth of 7.7%. According to The Australian:

The company has a demonstrated track record of growing ahead of the broader global hotel wholesale market.

[Valuation] is justified by higher earnings before interest, taxes, depreciation and amortisation (EBITDA) growth expectations.

RBC rates Webjet a buy with a $8.50 price target.

What about other brokers?

Morgans is similarly optimistic about WEB Travel Group's post-demerger future. According to my colleague James, it retained its buy rating for Webjet, with a revised price target of $8.60.

Morgans highlights management's strong track record of capturing market share in the travel distribution sector.

Despite some potential softness in its upcoming financials, the broker expects Webjet's long-term growth trajectory to remain strong.

UBS also weighed in positively before the demerger, maintaining a buy rating with a price target of $10 for Webjet shares.

Foolish takeaway

Webjet shares are on investors' radar after the company's demerger, which has created two separate companies, each with distinct growth opportunities.

Webjet is up nearly 7% in the past year of trade.

Motley Fool contributor Zach Bristow 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Travel Shares

Young girl smiles with her hand on top of a suitcase while standing on the tarmac with an aeroplane in the background.
Travel Shares

Will the Qantas share price keep soaring? Here's what experts say

The Qantas share price has well and truly left the tarmac in 2024.

Read more »

A woman reaches her arms to the sky as a plane flies overhead at sunset.
Travel Shares

Why did the Qantas share price rocket 26% in the past quarter?

Investors have been fighting to get hold of the Flying Kangaroo's shares recently.

Read more »

A sad woman sits leaning on her suitcase in a deserted airport lounge as the Qantas share price falls
Travel Shares

Qantas share price sinks 5% on huge Qatar Airways-Virgin Australia deal

Qatar Airways is investing in Virgin Australia ahead of the latter's potential return to the ASX boards.

Read more »

A little boy in flying goggles and wings rides high on his mum's back with blue skies above.
Travel Shares

$10,000 invested in Qantas shares one year ago is now worth…

This airline stock has been flying high lately.

Read more »

Smiling woman looking through a plane window.
Travel Shares

This insider just spent $500k on Qantas shares

A major investment has been made by a key figure.

Read more »

Couple at an airport waiting for their flight.
Travel Shares

Is the Webjet share price really sinking 12% today?

Today's decline could be very good news for shareholders.

Read more »

Smiling woman looking through a plane window.
Travel Shares

Qantas share price hits 52-week high despite new legal probe

The NZ regulator will shortly file proceedings.

Read more »

A smiling boy holds a toy plane aloft while a girl watches on from a car near an airport runway.
Travel Shares

Can the Qantas share price maintain this lofty altitude?

Qantas share have gained 31% in 2024. Now what?

Read more »