The Webjet Limited (ASX: WEB) share price fell by as much as 5% in early trade today after broker Credit Suisse downgraded Webjet shares and slashed its price target for the company.
Today’s decline continues a difficult period for Webjet, with shares in the leading online travel agent down nearly 40% since April.
Webjet Operations
Webjet is an online travel business offering packages to both consumer markets (‘B2C’) and wholesale markets (‘B2B’). It was established in 1998 and has grown rapidly via a number of acquisitions and the shift to booking holidays online.
Last year’s acquisition of Destinations of The World for USD$173 million has cemented Webjet as one of the biggest players in the online travel space and looks set to drive revenue growth in the coming years.
Why The Webjet Share Price Is Falling
A note out from broker Credit Suisse this morning is likely a key driver of today’s sell off. The broker has downgraded Webjet from outperform to neutral and drastically cut its price target for the company’s shares by 21% to $11.00.
The downgrade comes on the back of the collapse of UK-based travel business Thomas Cook, which owed €27 million to Webjet at the time of the collapse, an amount that has now been written off.
Credit Suisse has revised its earnings forecasts downwards by around 10% for both FY20 and FY21. It now estimates Webjet will record earnings per share (EPS) of 70.4 cents this financial year, which implies a forward looking price to earnings multiple of 15x.
Bargain Or Value Trap?
I remain bullish on the long-term prospects for Webjet. I think that any further share price weakness will only continue to push Webjet shares firmly into good buying territory.
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At the time of publishing, Luke has no financial interest in any companies mentioned.
