The S&P/ASX 200 Index (ASX: XJO) may be storming higher on Friday, but not all shares are doing the same.

One area of the market that is missing out on today’s rebound is the travel sector.

Here’s a snapshot of the sector at the time of writing:

• The Corporate Travel Management Ltd (ASX: CTD) share price is down 3%.
• The Flight Centre Travel Group Ltd (ASX: FLT) share price is 1.5% lower.
• The Qantas Airways Limited (ASX: QAN) share price is down 1%.
• The Webjet Limited (ASX: WEB) share price is down over 0.5%.

Why are travel shares underperforming today?

Today’s underperformance appears to have been sparked by comments out of the International Air Transport Association (IATA).

On Thursday the trade association for the world’s airlines warned that the impact of the pandemic on air travel was likely to be felt for many years to come.

In fact, the IATA estimates that passenger traffic won’t rebound to pre-crisis levels until at least 2023. This would be a blow for the likes of airline operators such as Qantas and travel bookers such as Flight Centre.

Though, the IATA’s director general and CEO, Alexandre de Juniac, told CNBC that he is optimistic that more planes will be in the skies in the next six weeks.

He said: “We are asking governments to have a phased approach to restart the industry and to fly again. We are aiming at reopening and boosting the domestic market by end of the second quarter, and opening the regional or continental markets — such as Europe, North America or Asia-Pacific — by the third quarter, and intercontinental in the fall.”

Mr de Juniac also revealed that he is against the idea of 14-day quarantine periods for travellers upon arrival. Given how this is arguably the length of a typical holiday, tourism markets are likely to struggle with restrictions of this nature in place.

He explained: “We are advocating with governments not to implement quarantine measures that will retain people for two weeks that will arrive anywhere. We think that it is useless provided we have implemented the health and sanitary controls that we are discussing with governments. It is absolutely key for the tourist industry which is so important for so many countries in Europe.”

It certainly looks like it will be an eventful few months for Australian travel shares. 

More reading

• Why Boral, Corporate Travel Management, United Malt, & Xero are dropping lower
• Broker tips 10 ASX 200 shares for a post-coronavirus recovery
• Why Beach, CBA, Qantas, & Xero shares are dropping lower
• Are ASX travel shares like Qantas great value?
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. 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.

The post Why Qantas, Webjet and these ASX travel shares are dropping lower today appeared first on Motley Fool Australia.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Video-streaming veteran Netflix (NASDAQ: NFLX) is trading near all-time highs right now, currently fetching $440 per share. Jefferies analyst Alex Giaimo sees more gains ahead. Giaimo opened coverage of Netflix on Thursday with a buy rating and a price target of $520 per share.

The investment thesis

The analyst cited three main reasons to own Netflix shares today:

• This company’s addressable market is “vastly underappreciated.”
• Improving profit margins will lead to sustainable free cash flows over time.
• Netflix has proven its “ability to create value” in a rapidly changing market.

Giaimo expects year-over-year subscriber growth to remain in double-digit percentages until 2023 alongside a relatively stable penetration of the domestic market. His model assumes Netflix will widen its international household penetration from 18% to 28%, addressing a global market of roughly 850 million broadband households. Meeting the analyst firm’s targets would give Netflix approximately 285 million subscribers in 2023, up from 183 million paid memberships today.

The financial background

Netflix has been consuming a lot of cash in recent years due to the high up-front costs of producing a lot of original content. Management has said that 2019 should be the peak of Netflix’s cash burn, topping out at $3.1 billion. Since content production efforts have ground to a halt under COVID-19 lockdown policies, Netflix expects to consume roughly $1 billion of free cash in 2020, followed by larger content production expenses in 2021.

The key to unlocking positive cash flows is indeed found in wider profit margins. Here’s how Netflix’s operating margins and cash profit margins have developed over the last three years:

NFLX Operating Margin (TTM) data by YCharts

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• 5 things to watch on the ASX 200 on Friday

Anders Bylund owns shares of Netflix. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Netflix. The Motley Fool Australia has recommended Netflix. 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.

The post Will Netflix Be a $520 Stock? appeared first on Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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In afternoon trade the S&P/ASX 200 Index (ASX: XJO) remains on course to end the week on a high. At the time of writing the benchmark index is up 0.8% to 5,372.5 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

The Boral Limited (ASX: BLD) share price is down 3% to $2.50. Investors have been selling the building products company’s shares following the release of a trading update. Boral revealed that revenues are down in most businesses in the first four months of the second half relative to the prior corresponding period. This is largely due to volume and cost pressures associated with bushfires in Australia in January followed by COVID-19 impacts more broadly. EBITDA margins for the period January to April 2020 are tracking ~3-5% lower than in the first half.

The Corporate Travel Management Ltd (ASX: CTD) share price is down 3% to $10.31. This decline may have been driven by comments out of the International Air Transport Association. It estimates that passenger traffic won’t rebound to pre-crisis levels until at least 2023.

The United Malt Group Ltd (ASX: UMG) share price has fallen 7% to $3.99. United Malt’s shares have come under pressure after completing a $140 million institutional placement. The malt business raised the funds at $3.80 per share, representing an 11.4% discount to its last traded price. The proceeds will be used to strengthen its balance sheet and provide financial and operational flexibility.

The Xero Limited (ASX: XRO) share price is down 4.5% to $76.32. This decline may have been driven by a broker note out of Macquarie this morning. According to the note, the broker has downgraded the accounting software provider’s shares to a neutral rating and cut the price target on them to $75.00. It made the move due to the uncertainty being caused by the pandemic.

More reading

• ASX 200 up 0.8%: Big four banks push higher but Xero tumbles lower
• ASX construction shares feel impacts of COVID-19 shutdowns
• Where growth, income, and value investors can invest $5,000 today
• Is the Xero share price a buy?
• ASX 200 drops 1.7%, Xero reports a profit

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool Australia owns shares of Xero. 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.

The post Why Boral, Corporate Travel Management, United Malt, & Xero are dropping lower appeared first on Motley Fool Australia.

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