The Flight Centre share price has made a flying start to 2023! Should I buy?

Despite being the most shorted share on the Australian share market, the Flight Centre Travel Group Ltd (ASX: FLT) share price has started the year strongly.

As you can see below, with another gain under its belt today, the travel agent’s shares are now up almost 10% in 2023.

Where next for the Flight Centre share price?

Unfortunately, I’m not aware of a single broker that has a buy rating on Flight Centre shares.

However, that doesn’t necessarily mean that analysts don’t believe they can climb higher from here.

For example, Goldman Sachs has a neutral rating and $16.10 price target and Morgans has a hold rating and $18.25 price target on its shares.

Based on the current Flight Centre share price of $15.79, the latter implies potential upside of 13% for investors from here.

Morgans highlights that the company is recovering from the pandemic, but also notes that uncertainty remains. It is for that reason that the broker only has a hold rating on its shares at present. It recently explained:

FLT is targeting further bottom-line improvement during FY23 and heavily skewed to the 2H. It said that it is too early to provide specific market guidance given normal travel patterns (local v long haul, holidaymakers v VFR) are yet to resume; China is yet to reopen; airline capacity is restricted; and its revenue margins are yet to stabilise and normalise.

The broker also believes that revenue margins may be softer in the near term but expects them to improve once capacity normalises and competition increases. It said:

FLT’s revenue margin is expected to remain below pre-COVID levels in the near term because of cyclical factors (higher airfare prices), planned business mix changes (growth in lower margin channels/businesses) and the lower commissions.

While capacity is restricted and the airlines load factors are high, we think FLT has reduced bargaining power with the airlines. However over the medium term, as capacity normalises and there is increased competition, we think the airlines will rely more on FLT as one of the world’s largest travel groups and will thus reward the company for its efforts.

All in all, the future is looking brighter for Flight Centre, but it may just have a few more dark clouds to get through first.

The post The Flight Centre share price has made a flying start to 2023! Should I buy? appeared first on The Motley Fool Australia.

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More reading

• Here are the 10 most shorted ASX shares
• Could ASX 200 travel shares be set for a major boost in 2023?
• Should I buy Flight Centre shares for spectacular dividend growth?
• Here are the 10 most shorted ASX shares
• The Flight Centre share price nosedived 18% in 2022. Is it preparing for take-off in 2023?

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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