The Webjet Ltd (ASX: WEB) share price moved in circles for most of last month. Indeed, it was a disappointing finish considering its shares touched a 52-week high of $6.89 on 4 October.
Investors appear to have mixed feelings when it comes to deciding the value of Webjet shares in the current climate. This is despite Australia opening its international borders to a number of countries today. The federal government suspended all non-essential travel from March 2020 when COVID-19 took the world by storm.
At the time of writing, the online travel agent’s shares are up 2.85% to $6.50.
What’s weighing down Webjet shares lately?
A catalyst for Webjet shares tracking lower last month could be the resurgence of COVID-19 cases in Australia.
As the super-infectious delta variant spreads through communities, state borders continued to be closed. Before COVID-19, the Sydney to Melbourne route was considered as the third busiest route in the entire world.
While some international routes have restarted, Webjet will be hoping for a speedy recovery.
No doubt, this will have a positive effect on the company which has been in hibernation mode since early last year. Although, Webjet still has substantial cash reserves to survive the ongoing crisis that has put the travel industry in a tailspin.
In its FY21 results released on 19 May, the company had a strong capital position at hand. Pro forma cash stood at $431 million with an average cash burn rate of around $5.5 million per month. This gives Webjet the ability to weather the unpredictable nature of COVID-19 for the next 6.5 years without having to raise additional capital.
However, a trading update released in late August revealed that Webjet will become cash flow positive for the first-half of FY22. This excludes investing and debt repayments.
In addition, the company highlighted that its WebBeds business has been profitable since July 2021. It’s a positive sign that recovery is not far off, particularly given Australia’s accelerated vaccination program.
All eyes will be on Webjet’s H1 FY22 results which will be released on 25 November 2021.
Webjet share price summary
In the last 12 months, Webjet shares have gained more than 86% since hitting near COVID-19 lows in October 2020. The company has gradually been moving on an upward trend but its share price is still a long way off pre-pandemic levels.
On valuation grounds, Webjet has a market capitalisation of around $2.47 billion with approximately 379 million shares on issue.
The post Why has October been such a lousy month for the Webjet (ASX:WEB) share price? appeared first on The Motley Fool Australia.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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