What are Webjet shares really worth in September?

The Webjet Limited (ASX: WEB) share price has come through relatively unscathed so far this year.

While the S&P/ASX 200 Index (ASX: XJO) has printed a 7.6% fall, Webjet shares have outperformed by shedding just 0.2% since the start of the year.

Webjet’s financial year ends on 31 March, so the ASX 200 travel share released its FY22 results back in May.

More recently, the company held its AGM at the end of August, which was accompanied by a trading update. 

Webjet also held a strategy day last week, providing strategy updates across its different business segments.

With the travel recovery underway, are there blue skies ahead for Webjet shares, or could they hit turbulence?

Let’s get the lay of the land and see what a couple of leading brokers think.

Why Webjet shares could reach higher ground

On the back of Webjet’s AGM, analysts at Macquarie upgraded their rating on Webjet shares to outperform.

The broker noted that overall activity is tracking broadly in line with its forecasts. Meanwhile, earnings before interest, tax, depreciation, and amortisation (EBITDA) margins are approaching or above pre-COVID levels.

Explaining its upgraded rating, Macquarie said:

Solid trading update with profitability ahead of expectations that increases our confidence WEB will deliver and sustain a structurally lower cost base. Despite some macro risks on the horizon, the medium-term growth outlook is favourable and underpinned by market share gains, ongoing tech investment, and a full recovery in travel markets. 

Macquarie has a 12-month price target of $6.15 for Webjet shares. This implies potential upside of 13% from the current Webjet share price of $5.42.

The broker believes the key downside risk to its target price is the softer macroeconomic outlook reducing travel activity. 

Recovery flight path on track

As my Fool colleague James recently reported, analysts at Goldman Sachs are also bullish on Webjet shares.

After assessing Webjet’s recent trading update, the broker maintained its buy rating with a slightly trimmed price target of $6.80. This implies potential upside of 25% from current levels.

Two key positives from the update that stood out to Goldman were the continued strength in the execution of Webjet’s business-to-business segment and a stronger than expected cash flow outlook.

However, the broker is mindful that a slower-than-expected recovery in international travel is holding back Webjet’s online travel agency (OTA) business.

On the whole, the broker concluded:

Overall, we view travel recovery as trending in the right direction, albeit with hiccups in the trend and we believe WEB remains well positioned to capitalise on the recovery through their online OTA offer and more importantly the strengthening position in the Bedbanks market. 

In positive news for income-hungry investors, Goldman expects Webjet to resume paying dividends next year.

The post What are Webjet shares really worth in September? appeared first on The Motley Fool Australia.

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Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs. The Motley Fool Australia has recommended Macquarie Group Limited and Webjet Ltd. 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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