The Webjet share price has dropped 9% in six months. Is now the time to pounce?

The Webjet Limited (ASX: WEB) share price has fallen by 9% over the past six months. Could it be time to go for the ASX travel share?

Some investors seem to think so, since 11 April 2022 the Webjet share price has risen by more than 10%.

As one of the ASX’s travel shares, it has been heavily impacted by COVID-19 and the related effects.

However, the analysts now think that it could be a reopening idea to think about.

Buy ratings on the Webjet share price

Multiple brokers now call Webjet a buy. Last week, Citi called the Webjet share price a buy, with a price target of $6.50. It thinks that the business model will allow its profit to scale quickly, with the company capable of taking market share. Management has talked up this potential.

Based on a return to profitability in FY23, the Webjet share price is valued at 33x FY23’s estimated earnings, according to Citi.

Ord Minnett also thinks that the Webjet share price is a buy, with a price target of $7.51. That implies a potential rise of almost 30%. This broker is also expecting a medium-term recovery for Webjet, with the potential to capture an increased share of the market.

The latest update

It’s been a while since the latest update from the company, which was the FY22 first half result.

Management said that the business was turning around as global travel markets started to reopen. It pointed to positive working capital delivering $3.5 million per month of a cash surplus.

It said that WebBeds had been profitable since July 2021, with costs down 30% compared to pre-COVID and it was on track to be 20% more cost-efficient at scale. The November 2021 total transaction value (TTV) was 63% of pre-COVID volumes, before many key markets had reopened.

The Webjet online travel agency (OTA) segment returned to profitability in October 2021.

It also said it was seeing a rapid return to high booking volumes as markets reopened. The third quarter was tracking ahead of the second quarter.

Webjet noted that it has expanded its geographic presence with WebBeds in the “key” North American market, added “significant” domestic inventory globally, and signed a range of new domestic and OTA customers. This means it has a “materially larger” opportunity for growth than was targeted before COVID-19.

The ASX travel share also said that Webjet OTA was positioned for growth and has a “genuine opportunity” to increase market share as consumers shift to buying online. It also noted that the innovations offered by the Trip Ninja technology would play a key role in growing market share of the international flights market.

Webjet said that the opportunities are “significant” with pent-up global demand. It thinks it will be back at pre-COVID booking volumes by the second half of FY23.

Webjet share price snapshot

While Webjet has dropped 9% over the last six months, it’s up around 8% since the start of the year. However, the Webjet share price remains heavily down since the pre-COVID price.

The post The Webjet share price has dropped 9% in six months. Is now the time to pounce? appeared first on The Motley Fool Australia.

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• What’s sending the Webjet share price 6% higher on Thursday?

Motley Fool contributor Tristan Harrison 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 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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