The Webjet Limited (ASX: WEB) share price could be an opportunity to consider after the latest developments.
International travel to come back in 2021?
Many ASX travel shares like Sydney Airport Holdings Pty Ltd (ASX: SYD) and Corporate Travel Management Ltd (ASX: CTD) have been hoping for a sustained recovery of travel. NSW may have sparked some more hope of international travel yesterday when NSW Premier Ms Berejiklian essentially told the media that when NSW hits its vaccination goals, more overseas Aussies would be able to come home.
It has also been reported that the federal government is planning for Aussies to be able to leave the country, come back and then seemingly quarantine at home rather than a hotel.
This could obviously be a big deal for Webjet because large parts of its earnings have been stifled since the start of COVID-19. International holidays could be a big deal for demand for Webjet’s services. Investors will just have to wait and see how many people are travelling by the end of the year. Any increase of total transaction value (TTV) could be good news for Webjet though.
How is Webjet trading at the moment?
The ASX travel share recently said that the business to business WebBeds division was profitable in July and August and is on track to be profitable in September. It has seen strong demand as travel restrictions ease in North America and Europe, suggesting “significant upside” as more international markets reopen.
Lockdowns are currently hurting the profitability of Webjet’s online travel agency business, as well as Online Republic. Management are confident both of these businesses will return to profit as restrictions ease.
It’s expecting to generate positive operating cashflow in the first half of FY22.
Is the Webjet share price an opportunity?
When you look at today’s earnings compared to the share price, Webjet still seems expensive. But investing isn’t just about the next six or 12 months. In a couple of years, travel could come back significantly. There is certainly a lot of domestic demand when restrictions allow.
It’s the actions the company has taken to have lower costs and be more profitable when scale returns that particularly attracts me. Costs are expected to be 20% lower once the company sees a return of demand.
