The S&P/ASX 200 Index (ASX: XJO) edged marginally higher as a number of ASX 200 shares surged last week. 

Last week I was watching Macquarie Group Ltd (ASX: MQG), Webjet Limited (ASX: WEB) and TechnologyOne Ltd (ASX: TNE).

Macquarie announced a $2,731 million full-year net profit and a $1.80 per share final dividend. That saw Macquarie shares surge 9.57% higher last week while Webjet shares jumped 9.33% higher on Friday as the Australian Government flagged an easing of restrictions. TechnologyOne shares also surged 7.05% higher as the ASX tech share climbed to a new 52-week high of $10.24 per share.

After a big week for last week’s top picks, here are the 3 ASX 200 shares that I’ll be keeping my eye on in the week ahead.

3 ASX 200 shares to watch this week

I think the Commonwealth Bank of Australia Ltd (ASX: CBA) share price is worth watching this week. Macquarie was the last of the major banks to report its earnings on Friday, but CBA reports on a different cycle. That means we haven’t seen the same level of interest in Australia’s largest bank compared to competitors like National Australia Bank Ltd. (ASX: NAB).

CBA shares could be on the move thanks to broader positivity about the Aussie economy. The government is looking to gradually ease restrictions, which is good for Aussie businesses. It’s also good for the banks that count these businesses amongst their clients.

Another ASX 200 share to watch this week is Flight Centre Travel Group Ltd (ASX: FLT). The Aussie travel company’s shares surged like Webjet’s on Friday, but I think there’s further to go. Domestic travel restrictions could soon be eased which is welcome relief for Flight Centre and its shareholders.

Having sold its Melbourne office tower for $62.5 million last week, Flight Centre could be in a solid financial position to restructure and turn things around.

Finally, I think Xero Limited (ASX: XRO) shares are worth watching. The ASX 200 tech share has lagged behind many of its WAAAX peers in recent weeks. Xero’s accounting platform is targeted at small and medium enterprises (SMEs). With more of these businesses preparing to re-open for business, that’s good news for keeping subscription numbers high in 2020.

More reading

• ASX tourism shares on watch as government flags easing of coronavirus restrictions
• Where to invest $20,000 into ASX shares for strong long term returns
• REA Group shares are up 53% since late March. Is it too late to invest?
• These ASX 200 shares saw the biggest falls last week
• How Macquarie Group is vying to unseat CBA

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Webjet Ltd. The Motley Fool Australia owns shares of Xero. 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.

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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to start the week on a very positive note. At the time of writing the benchmark index is up 1.1% to 5,451.6 points.

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

The Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price is down 3% to $27.13. This is despite there being no news out of the medical device company. However, with its shares up almost 30% year to date, some investors may have decided to take a bit of profit off the table. Fisher & Paykel Healthcare’s shares have been strong performers this year thanks to increasing demand for its ventilators.

The Graincorp Ltd (ASX: GNC) share price is down 4% to $3.45. This follows news that China is threatening to slap an 80% import tax on Australian barley. China alleges that the Australian government is subsidising farmers and allowing them to dump barley into China at cheaper prices than those offered by Chinese farmers.

The Polynovo Ltd (ASX: PNV) share price is down 1.5% to $2.51. This decline appears to be down to profit taking. After all, the medical device company’s shares were on fire last week and recorded a gain of 28% over the period. This followed Polynovo’s appearance at the Macquarie Group Ltd (ASX: MQG) Investor virtual conference. Management spoke positively about the $7.5 billion market opportunity for its NovoSorb product.

The SEEK Limited (ASX: SEK) share price is 1.5% lower at $17.18. At the end of last week analysts at Morgans downgraded SEEK’s shares to a reduce rating with a $15.55 price target. It believes that job listing volumes will be lower for longer and feels the market isn’t factoring this into its current share price.

More reading

• Indonesian market boom for 6 ASX shares
• These ASX shares booked the biggest gains last week
• These ASX 200 shares are up over 1,000% in just 3 years
• ASX 200 Weekly Wrap: New ASX bull run continues
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended SEEK 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.

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The share prices of a number of ASX companies that were hit hardest by the coronavirus lockdown leapt higher on Friday afternoon after the Federal Government laid out its plans for the gradual easing of social restrictions. Travel agent Flight Centre Travel Group Limited (ASX: FLT) jumped over 8% to $10.76, while online flight comparison website Webjet Limited (ASX: WEB) ended the day up 9% at $2.93. 

Friday’s performance is little consolation to long-term shareholders, with both ASX tourism shares still well short of their pre-coronavirus highs. Flight Centre had begun the year hovering around $40 a share and is still down close to 75% year-to-date. Webjet has seen a similar percentage decline in its share price so far in 2020, after it opened the year trading at roughly $10, although it has rocketed out of the gates this morning and is currently up another 11.95% on Friday’s close.

However, the short-term rise does show that in investors are seeing glimmers of hope for both companies in the Australian Government’s “3 Step Framework for a COVIDSafe Australia”. While the future for global travel is still uncertain, the government has laid out a roadmap towards states reopening their borders for domestic recreational travel in the coming months. There are even whispers of a trans-Tasman bubble for some international travel between Australia and New Zealand by summer.

These are the first positive signs for a tourism industry which has been effectively destroyed by the coronavirus pandemic. Apart from some repatriation services, just about all international flights have been grounded as countries lock down their borders to halt the spread of the virus. Domestic tourism has all but ceased too, with states similarly closing their borders to outsiders and most people urged to stay indoors. An entire school holiday period has come and gone with most families confined to their houses.

Should you invest in ASX tourism shares?

Despite their recent gains, the share prices of both Webjet and Flight Centre are trading at historic lows. But the 2 companies are now operating in an economic environment which is fundamentally – and potentially even permanently – changed by the coronavirus. And while these most recent announcements by the government could lay the foundations for a slow path back to profitability for the failing tourism industry, business-as-usual is still a long way off.

Unfortunately for Webjet, it has invested heavily in expanded its international operations. In its first half FY20 results, Webjet reported a 43% jump in earnings before interest, tax, depreciation and amortisation (EBITDA) to $86.3 million. But over 60% of group EBITDA was contributed by its WebBeds business, which provides international accommodation booking services. Domestic bookings were actually flat for the half.

It could easily be argued that in a new “COVIDSafe” economy where people are only able to travel domestically – or at best, to New Zealand – local travel bookings will increase. But whether they can increase to such a degree that they can offset the enormous losses in higher margin international bookings is very doubtful.

The steps back towards some degree of normality flagged by the Federal Government are a welcome sign for an economy crippled by coronavirus. But with so much uncertainty still on the horizon, it might be just too risky to think about investing in the tourism sector right now.

However, it’s also true that at these bargain-basement prices both companies offer significant upside potential for early movers. So, it will still definitely be worth watching Webjet and Flight Centre over the coming months as social restrictions ease to get a sense of what consumer behaviour will be like in our new “Covidsafe” economy.

More reading

• Market close: ASX 200 ends 0.5% higher
• Federal Government outlines 3-step plan to reopening Australia
• Is this the next major ASX financial institution to raise capital?
• Is the Flight Centre share price in the buy zone?
• Is it time to buy ASX travel shares again?

Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended 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.

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