Web Travel Group Ltd (ASX: WEB) shares, which have recently come off the boil, could yet recover to around their 12-month highs, Macquarie analysts say, delivering a handy return of 67.4%.
The company was formed in September last year, when Webjet Ltd demerged into two companies: Web Travel Group, which owns the global business-to-business travel distribution business WebBeds, and Webjet Group Ltd (ASX: WJL), which owns the business-to-consumer division of the previous company.
The former company's board said at the time the demerger was conducted to get the best value from "the attractive but divergent growth opportunities available to both businesses''.
Share price drop a buying opportunity
In the past 12 months, Web Travel Group shares have traded as high as $7.03, but have been weaker recently, trending downwards towards the current level of $4.16 per share.
But after a recent market update, Macquarie analysts say the stock is looking cheap.
Earlier this week, Web Travel Group provided a preliminary update on bookings and total transaction value (TTV) for the WebBeds business for the six months to the end of September.
The update showed that both figures were "significantly ahead of the previous corresponding period", with WebBeds bookings up 18% over the period, compared with earlier guidance of growth in the mid-to-high teens.
Total transaction value in Australia was up 22% to $3.17 billion, and grew by 14% in the other regions combined.
The company said it remained on track to deliver record EBITDA in the current financial year.
Macquarie analysts said the update was slightly better than expected, with foreign exchange rates acting as a tailwind to TTV growth.
Web Travel Group is trading at a material discount to its recent history. We see this as a buying opportunity, considering its medium-term outlook.
Macquarie has an outperform rating on the stock, with a 12-month price target of $6.98.
The broker's analysts said they believed the recent sell-off was "unjustified".
Web Travel Group's medium term growth story remains intact, and we have increased conviction concerning its ability to scale, and short-term revenue, and underlying EBITDA margin profiles.
Macquarie's analysts said they were also increasingly confident the company would reach its target of $10 billion in TTV in FY30, and said the company's earnings, "should outperform other ASX travel peers in volatile macro conditions''.
Web Travel Group will release its first-half results on November 25. The company was valued at $1.5 billion at the close of trade on Tuesday.
