The Webjet Limited (ASX: WEB) share price could be one to watch over the next 12 months for a few different reasons.
Why the Webjet share price could be a mover
The travel sector is still suffering right now because of the impacts of COVID-19. Businesses like Qantas Airways Limited (ASX: QAN) and Flight Centre Travel Group Ltd (ASX: FLT) are suffering as well as Webjet.
There’s a lower level of domestic travel and international travel is almost non-existent. The Webjet share price suffered heavily over the last 13 months because of it.
But I don’t believe it’s always going to be a difficult time for Webjet. There could be a recovery on the cards.
COVID-19 vaccine rollout
Whilst Australia is struggling to vaccinate large amounts of its population, key markets in the northern hemisphere are making good progress and this could bring forward demand for Webjet’s WebBeds business.
Webjet has already seen its online travel agency (OTA) business return to profitability thanks to its ability to utilise its changeable cost base.
Even just the opening up of Australia’s domestic borders saw significant bookings growth and traffic growth. It continues to take market share – growing twice as fast as the market since May.
According to research quoted by Webjet, 96% of global travellers say they will continue to fly and 94% say they will keep using hotels.
The domestic leisure markets are expected to drive Webjet EBITDA (EBITDA explained) back to FY19 levels by FY23.
Bigger goals and efficiencies
Webjet has said that it’s on track to reduce group costs by at least 20% through a range of initiatives in all businesses to achieve operating leverage when travel markets reopen.
The ASX travel share also wants WebBeds to emerge as the number one player in the world. Key areas of focus include becoming more efficient in procuring and selling inventory, as well as servicing customers.
Webjet is now targeting ‘8/3/5’, meaning it’s expecting the EBITDA margin to be higher than before COVID-19 came along at 62.5%. Those numbers mean that it wants revenue to be 8% of total transaction value (TTV), costs to be 3% of TTV and EBITDA to be 5% of TTV.
New technology
Webjet went to some length to explain in a presentation how it sees technology as an important part of the strategy to grow the business.
It explained how blockchain technology, and Rezchain and LockTrip, can help reduce costs significantly, particularly manual costs needed to address disputes.
There’s also the opportunity for Rezchain to be used in other industries such as real estate, pharmaceuticals and fashion.
Summary thoughts about Webjet and the share price
Before COVID-19, Webjet was a very promising business with global growth aspirations. Its technology and efficiencies seem very attractive in my opinion.
The key question is – how long will it take for global growth to return to normal? If global vaccinations continue on the current pace, then things looks promising for FY22 and beyond. But Webjet shares certainly aren’t cheap right now, so a delay in vaccination targets (or new troubling variants) could cause volatility.
Webjet is one of a group of ASX growth shares that may be able to do well over time.
