The Flight Centre Travel Group Ltd (ASX: FLT) share price has crashed 24% since 17 October 2024 after giving an update. It hit a 52-week low of $16.37 yesterday.
Investors didn't like what they heard in the update and decided the ASX travel share was worth significantly less than it was at the start of September 2024.
You can read the full coverage from the update by my colleague Bernd Struben.
One of the most important points to me from that update included Flight Centre saying global corporate sector activity was flat during the quarter. Client wins are helping drive total transaction value (TTV) and transaction volume growth in its global corporate business. However, growth in the FY25 first quarter was negatively impacted by airfare deflation and downtrading in some large accounts, though Flight Centre noted there are "positive early signs for October."
Flight Centre also said its ongoing focus is the 2% underlying profit before tax (PBT) margin, but overall profit growth is the main priority.
Now that the dust is settling, let's look at what one leading broker makes of the value on offer with the current Flight Centre share price.
Leading broker views on the ASX travel share
When looking at the update, UBS said that Flight Centre is benefiting from "strong momentum in new client wins and enjoys a degree of insulation from the softer consumer backdrop through its heavier exposure to baby boomers".
The broker also noted that a significant portion of its corporate work is transaction-based, which can offset ticket deflation. Lower ticket pricing and higher volumes can mean more revenue and profit before tax for each dollar of TTV.
Within leisure, UBS suggests lower airline ticket prices "should help stimulate activity and change the TTV skew towards higher commission hotel/ancillary product".
Productivity benefits will help drive a significant part of its profit growth expectations in FY25, which should be experienced more in the seasonally stronger quarters.
UBS believes the decline of the Flight Centre share price "was overdone".
The broker said:
We remain positive on the changes to the businesses, the market positioning within corporate, and the operating leverage opportunity. Valuation does not look demanding – FY25 PE of 14.5x, offering 3yr EPS [earnings per share] CAGR [compound annual growth rate] of +15%.
UBS rates Flight Centre as a buy, with a price target of $23.50, implying a possible rise of more than 40% over the next 12 months.
The broker forecasts Flight Centre could make $1.18 of EPS in FY25 and it could grow to $1.78 by FY28. If profit keeps growing, the ASX travel share could prove the doubters wrong.
