Is the Webjet Limited (ASX: WEB) share price a buy?
Just over a week ago I looked at whether the Webjet share price was a buy. I concluded it seemed cheap if travel can return sooner rather than later. Since then it’s gone up about 12% in a week – that’s a quick return if you bought at the time!
I wasn’t expecting it to make such a quick double digit return. So I thought I’d revisit my thinking on the Webjet share price. Investment thoughts can change if something goes up or down over 10% in such a short time.
Why I was feeling bullish
The company raised around $350 million in a capital raising which is being used to strengthen the balance sheet because of the travel restrictions that are in place globally due to the coronavirus. I think this puts the business in a much stronger position compared to a lot of its travel peers – Webjet should be able to easily survive to December 2020 even if strict restrictions remained. That alone was a boost to the Webjet share price.
But the restrictions are lifting much earlier than expected. I believe international travel is nowhere close to coming back yet though. But the possibility of domestic travel has been brought forward with some other restrictions ending. The NSW government has said that people will be able to visit regional NSW. I think that’s very promising that domestic bookings could start again sooner rather than later.
I think Webjet also has an advantage in that it delivers its service online. That means it has a lower cost base and customers will still be able to access all of the options, it’s not like a closed physical travel agent shop.
Is the Webjet share price a buy now?
After a quick 12% rise from around a week ago I think I’d be inclined to take profits off the table today. The share market has returned an average of 10% a year over the decades, so making 12% in a week is an attractive return and I’m cautious about investors expecting too much from Webjet this year.
Hopefully it can keep rising and I still believe it could be a solid performer over the next 5 to 10 years, but taking profits off the table today wouldn’t be a terrible decision.
It could be a great idea to consider some other ASX shares which are still trading cheaply.
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More reading
- Can we value ASX shares with P/E ratios in 2020?
- Why James Hardie, Oil Search, Webjet, & Westpac shares are jumping higher
- 3 industries that may never recover from COVID-19
- Why a buy and hold strategy for ASX shares is best
- Why Qantas, Webjet and these ASX travel shares are dropping lower today
Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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