Are Flight Centre shares trading at a New Year discount?

The Flight Centre Travel Group Ltd (ASX: FLT) share price is on course to end a difficult year on a positive note.

At the time of writing, the travel agent giant’s shares are up 1.5% to $14.42.

However, as you can see below, Flight Centre shares will still end the year with a 12-month decline of over 20%.

Are Flight Centre shares trading at a New Year discount?

Flight Centre certainly is an interesting case.

I’m not aware of a single broker that has a buy rating on Flight Centre shares at the moment.

However, there are a large number of brokers that have price targets that imply material upside potential for its shares in 2023.

For example, earlier this month, analysts at Macquarie put a neutral rating and $17.35 price target on the company’s shares. This implies potential upside of 20% for investors from current levels.

Elsewhere, Citi currently has a neutral rating and $16.60 price target on its shares. If the Flight Centre share price were to reach that level, it would mean a 15% gain for investors from where it trades today.

Finally, Goldman Sachs currently has a neutral rating and $16.10 price target, which suggests potential upside of almost 12% for investors.

These analysts appear to be waiting for signs that margin pressures are easing before considering an upgrade to buy. Goldman Sachs commented:

Following the trading update flagging stronger than expected TTV trends, we revise our TTV expectations by +5.6%/3% respectively over FY23/24. However, we expect revenue margins to continue trending weaker into FY24 as inflation led recovery is only expected to normalize into late FY24.

Short interest

It is also worth noting that Flight Centre shares are the most shorted on the Australian share market, with a massive 14.7% of its shares held short.

Clearly, these short sellers believe its shares are overvalued and can still fall meaningfully from current levels, which is a risk for investors to consider.

Though, conversely, if sentiment shifts quickly, we could be in for an almighty short squeeze in 2023 given how much of its free float is held short.

All in all, it certainly makes Flight Centre one to watch closely next year.

The post Are Flight Centre shares trading at a New Year discount? appeared first on The Motley Fool Australia.

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More reading

• Why is the Flight Centre share price in the red today?
• Bought $1,000 of Flight Centre shares 10 years ago? Here’s how much dividend income you’ve received
• Here are the 10 most shorted ASX shares
• Here are the 10 most shorted ASX shares
• Looking to buy Flight Centre shares? Here’s why this insider tips 2023 to be a big year for business

Motley Fool contributor James Mickleboro 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 Flight Centre Travel Group. 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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