Shares in Web Travel Group Ltd (ASX: WEB) have made a strong recovery in recent months but remain more than 10% down over the past 12 months.
The analysts at UBS believe the recovery is set to continue, however, and they have just upgraded their price target on the company, which I'll get to shortly.
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Trading update solidly positive
First, let's have a look at the company's recent announcements about how the business is travelling.
In late August, Web Travel Group upgraded its guidance, now expecting first-half FY27 revenue to be up 14% to 16%, compared to previous guidance of 11% to 15%.
The company said it also expected its margins to be at least 6.7%, up from 6.5% for the same period last year.
And on the earnings front, the company expected underlying EBITDA to be $85 to $89 million, up from previous guidance of $80 to $86 million.
Web Travel Group Chief Executive John Guscic said of the changes:
The decision to upgrade guidance is due to the increased velocity of bookings and improved margins in trading. The Americas continues to see extremely strong growth. The performance of Europe, MEA and APAC have improved in the second quarter. 1H27 is on track to be the third consecutive 6-month period where TTV margins have improved over the prior corresponding period. The demonstrable operating leverage is a direct result of the optimisation initiatives and investments we made in FY26 that are delivering earlier than expected.
Shares looking like a good buy at these levels
UBS said Web Travel Group's new strategy appeared to be paying off.
They added:
In our view, the strategy to further build WEB's directly contracted hotel inventory (higher margin) is allowing WEB to continue to take share – whilst maintaining healthy net margins. Should the normal seasonal skew unfold, we see a further 5% upside to eanrings per share in FY27. Given 70% of costs are fixed, our analysis suggests WEB has also potentially implemented some cost initiatives. If WEB once again proves it can hold or improve margins at 1H27, we believe this should warrant a re-rate.
UBS said it was only factoring in $60 million of a potential $90 million in share buybacks into its valuation of the company.
UBS upgraded its price target on Web Travel Group from $4.60 to $4.85, compared to $3.71 at the time of writing.
If achieved, this would constitute a 30.7% return.
Web Travel Group is valued at $1.4 billion. The company is expected to release its first-half results on November 25.
